THE ECONOMICS of OUR CLIMATE CRISIS by Trisha Prabhu

THE ECONOMICS OF OUR CLIMATE CRISIS By Trisha Prabhu

INTRODUCTION

Today, one of the most - arguably, the most - important issue facing humanity is human-caused climate change. Climate change not only threatens our Earth, but the almost 8 billion individuals who live here. Indeed, estimates find that 800 million people - or around 11% of the population - are vulnerable to the immediate effects of climate change, such as droughts, floods, or extreme weather events (“Climate Change” 2020). Experts predict that tourist attractions - place you know and likely love - like the Everglades and Miami This is what a Beach, will be submerged by the end of the century (Cusick 2020). parking lot in Second to the humanitarian crisis that climate change will bring Miami Beach, FL, is the economic crisis that will surely follow. Infrastructure will be looked like before destroyed. Economic output will be reduced. Adaptation and change the onset of will cost billions, if not trillions of dollars. Perhaps most concerning: Hurrican Dorian. despite these realities, most Americans and global citizens/nations Some experts remain disincentivized to confront the economics of our climate believe this may be crisis. This leads to a key question: how do we best estimate, mitigate, a more permanent and begin preparation for the economic effects of climate change? picture. In this briefing, we’ll try to answer that question; namely, we’ll Scientific American explore the economics of climate change. As Congress(wo)men, it will be your job to critically evaluate the information presented - a deep dive into the various facets of the problem at hand, a review of past action, an analysis of pertinent ideological viewpoints, and a range of potential solutions - and determine where you stand.

HARVARD MODEL CONGRESS

EXPLANATION OF THE ISSUE

Historical Development In examining the economics of climate change from a historical perspective, one must turn to the evolution of climate change’s potential economic effects - how these effects/our understanding of them have changed, both in substance, and urgency, over the last few centuries. In doing so, we must differentiate between the United States (US) and the globe, which have seen rather distinct histories. Domestic Development Before the Industrial Revolution of the late 19th and early 20th century, the concept of a “greenhouse effect” was developed by early scientists, but it was not considered applicable to Earth and human activity (“Climate Change History” 2020). It was only after the Industrial Revolution (and the onset of extensive use of fossil fuels), which took place in Europe and the US, that, in the early 20th century, American scientists began to suggest that the Earth could be warming (“Climate Change History” 2020). In 1989 the US, along Kyoto Protocol – with other developed nations, established the Intergovernmental An international Panel on Climate Change (IPCC) under the United Nations to treaty signed by determine climate change’s economic impacts; this panel President Bill Clinton determined for the first time that these impacts could be severe in 1997; it called for (“Climate Change History” 2020). In 1997, the US, sensing the reducing the emission urgency of the matter, signed the Kyoto Protocol, the first global of six greenhouse agreement to reduce greenhouse gases, but in 2001, then-President gases in 41 countries Bush pulled out of the Protocol, arguing that it hurt the US economy in the short term (“Climate Change History” 2020). A similar situation played out in 2016, with the Paris Agreement and President Donald Trump. International Development Globally, the history of climate change economics focuses on BRICS nations - Brazil, Russia, India, China, and South Africa. In the late 20th and early 21st century, these countries saw tremendous In 2007, China economic growth (their Industrial Revolution, so to speak), which overtook the led to increasing emissions - and concern about the potential United States as economic effects of climate change on these nations (“The Response the world’s largest Of…” 2020). India, for example, began detailed climate change emitter of economic assessments, determining that climate change could pose greenhouse gases. serious risks to their citizens’ livelihoods (“The Response Of…” 2020). Scope of the Problem The economics of climate change is an issue with a wide scope; specifically, the issue extends itself to a subset of key problems,

including: 1) estimation of the “cost” of carbon, 2) how best to prepare for the physical damages we’re likely to incur, 3) to what extent we can reduce effects on total economic output, and finally, 4) how best to economically incentivize change. As you can imagine, these dilemmas themselves are rather complex - and thus, explored in-detail in the sections below. Economic Tradeoffs: Estimating The “Cost” of Carbon Perhaps the most important “mini-issue” under the umbrella of the economics of climate change is what is commonly referred to as the “social cost of carbon” (Evans et al. 2017). As discussed, scientists already have irrefutable evidence that society’s increasingly rapid emission of carbon dioxide (CO2) will have negative repercussions for our climate. With that said, that leaves us with an important

Climate change will question: how best can we estimate the future economic damage of have a range of emitting one ton of carbon? After examining all of the quantifiable economic effects, costs and benefits (example: costs - rising sea levels, which will impacting submerge infrastructure, vs. benefits - increased yield for some everything from crops), what’s the “cost,” so to speak, associated with emitting one infrastructure to ton of CO2 into the atmosphere today (Evans et al. 2017)? Estimation agriculture. How do of the social cost of carbon is an extremely important issue, because we estimate that? it plays a critical role in climate policy - if the social cost of carbon is CarbonBrief high, then, economically, it makes sense to take drastic measures in the present to mitigate climate change; if it’s low, the imperative to act is less urgent (Evans et al. 2017). The dilemma associated with this issue is disagreement on how, exactly, to estimate the “cost” of carbon. Different nations assign different values to the “cost” of carbon (as they’ll each be affected differently); in the U.S, the cost is calculated by several federal If the social cost of agencies in cooperation with the Executive Branch (“The true cost…” carbon is high, 2020). The current central estimate is around $50 per ton of carbon, though most experts agree that estimate is too low (“The true cost…” then, economically, 2020). it makes sense to take drastic Bracing For Physical Impact: Damages and Adaptation measures in the Another increasingly acknowledged issue in the economics of present to mitigate climate change is the “loss and damage” of property that nations are climate change. sure to face. These “damages” include property, arable land, or the complete disappearance of low-lying nations, as well as the

extinction of species with economic value (Mogelgaard and McGray 2015). Naturally, this reality presents a number of dilemmas: how and to what extent should we prepare for such damages? To that end, how much should we invest in “adaptation,” or efforts to adapt our society and environment to new threats? Examples of adaptation include early warning systems, climate-resilient infrastructure, improved dryland agriculture (investing in drought-resistant crops,

for example), and making our water resources more resilient (Rosa- Aquino 2019). Here, once again, there is plenty of disagreement on how to prepare for these changes. Organizations such as the Global Commission Adaptation have advocated for big investments - figures as large as $1.8 trillion - arguing that in the long run, these investments will reap rewards (Rosa-Aquino 2019). Effects On Total Economic Output: Mitigation Unfortunately, damages/adaptation aren’t the only concern when it comes to the direct economic impacts of climate change. Recent research from the National Bureau of Economic Research suggests that it’s likely that catastrophic weather events will also mean lower worker productivity and reduced worker health and lifespan, which will reduce total economic output (Freedman 2019). The paper finds that if we continue upon the path we’re currently on Gross Domestic (“normal business”), US gross domestic product (GDP) could be Product (GDP) – cut by 10.5% by 2100 (Freedman 2019). The total value of This presents a number of important dilemmas: apart from goods and services attempting to slow emissions, how best can we mitigate these effects produced in a country on output? What (if any) investments should we make in our in one year; GDP is workforce and the American workplace? And given that the commonly used as a aforementioned research also finds that different sectors of the benchmark for American economy will be impacted in different ways, what changes economic health (if any) should the US makes as it builds its economy of the future?

Behavioral Economics: Incentivizing Change Finally - and perhaps most interestingly - a key component of the economics of climate change is rooted in human behavior. From an economic perspective, for many Americans and American corporations, the future “cost” of carbon (which we just discussed!) means that it makes monetary sense to stop certain activities (for example: relying on a coal-powered factory for production) (Gordon 2019). Despite those calculations, though, psychology gets in the way - because these companies often don’t quantify (and thus immediately “feel”) the future cost - the carbon externality - that the factory presents, they aren’t incentivized to change (Gordon 2019). This, of course, leads to an important dilemma: how can we Externality – The simulate that future cost, so citizens and companies respond cost of an activity on adequately to economic realities? a third party, that has These ideas also apply in an international setting. From an no control over the economic perspective, it makes sense for nations to collaborate in the cost (such as society) fight against climate change, but because few nations quantify/take into account the future costs of not working together, these nations are not incentivized to join forces (Bosetti et al. 2012). Here, the question becomes: how can the US ensure that other nations “feel” that cost now? In economics, this problem is called a “tragedy of the commons” – the outcome for everybody (all the companies in the US,

or all the nations in the world) should emissions continue will be catastrophic, but if any single actor (company or nation) takes action, it alone will bear the costs, which will often prove too high for it while the other actors “free ride” off the benevolent actors’ behavior. Congressional Action To better understand this issue, let us now turn to 1) past congressional action to tackle these facets of the economics of climate change, as well as 2) a brief analysis of why action has been relatively limited. As discussed, the social cost of carbon is determined by federal agencies and the Executive Branch; with that said, Congress has demonstrated interest in joining the conversation. In 2017, Rep. John Delaney (D-MD) introduced HR 2326, the Climate Solutions Commission Act of 2017, which would establish a bipartisan National Climate Solutions Commission to make recommendations to the Executive Branch regarding the economics of climate change (such as the social cost of carbon) (Delaney 2017). The social cost of On the issue of damages/adaptation, Congress has similarly carbon is proposed - but struggled to pass - relevant legislation. For example, in 2007, Sen. Maria Cantwell (D-WA) introduced S 2355, the Climate determined by Change Adaptation Act (Cantwell 2007). The act called for federal federal agencies agencies and national programs to begin adaptation planning and and the Executive work - especially for US coastal states (Cantwell 2007). It didn’t pass Branch; with that in the Senate (Cantwell 2007). In 2019, Rep. Rosa L. DeLauro (D- said, Congress has CT) introduced HR 658, the National Infrastructure Development demonstrated Bank Act of 2019, which proposed re-building the nation’s infrastructure to be better protected from the effects of climate interest in joining change (“How the 116th…” 2019). 5 similar bills were proposed in the conversation. 2019, but like DeLauro’s bill, none passed both chambers (“How the 116th…” 2019). The theme is similar on the issue of mitigating effects on total economic output - legislation presented, but never signed into law. In 2019, Rep. Kathy Castor (D-FL) introduced HR 9, the Climate Action Now Act, which requires the president to report clean energy job growth, as well as research on climate change’s impacts on the competitiveness of the US economy and US workers (Castor 2019). Unfortunately, the bill passed the House, but not the Senate (Castor 2019). On the issue of economic incentives to change citizen and Over 50 carbon corporate behavior, Congress was once relatively active, but in recent pricing bills have years, has found itself deadlocked. Indeed, today, over 50 carbon been introduced, pricing bills have been introduced, but none have passed (“Know The th but none have Legislation” 2020). Under the 115 Congress, however, HR 7173, the Energy Innovation and Carbon Dividend Act of 2018, was introduced passed. by 3 Republicans and 3 Democrats (“H.R.7173” 2020). The bill called for a carbon tax (discussed in-detail later in this briefing), the revenue of which would be paid in dividends to American citizens

(“H.R.7173” 2020). Though the bill hasn’t been passed, it’s been widely seen as an indicator of renewed interest in bi-partisan solutions. (“Know The Legislation” 2020). Overall, though - as implied in several of the examples above - congressional action has been relatively limited. Why? Simply put, ideological viewpoints on the US economy and climate change are extremely polarized; together, both subjects are even more controversial. We’ll discuss this in-detail later, in the “Ideological Viewpoints” section. Other Policy Action Policy action on the economics of climate change, however, is not limited to federal bodies - other entities, including individual states and international governments, have already started to take action. Let’s begin with states. Because of how authority on different issues is delegated, state action has focused quite a bit on climate change damage prevention/adaptation. On this issue (as opposed to determining the cost of carbon, for example), states have relatively wide latitude. Today, 18 states have climate adaptation plans that include agricultural reform (Athanasiou 2018) and only 8 states have instituted no plan at either the state or local level (“State and Local…” 2018). Some states have proposed sweeping measures. In 2014, New York Governor Andrew Cuomo signed the Community Risk and

This bridge was one Resiliency Act (CRRA) (“Adaptation to Climate Change” 2020). The of many destroyed Act requires applicants to certain state programs to demonstrate that in New York due to they’ve considered future climate risks (e.g. sea surge) on their Hurricane Irene infrastructure, and imposes a number of resiliency regulations on (2011). Ensuring State permitting and funding decisions (“Adaptation to Climate that the state’s Change” 2020). States have also been able to take action on the issue infrastructure is of creating economic incentives for change. 10 states - that are home ready for similar to 25% of the US population - have successfully established a carbon effects due to pricing program (directly or indirectly taxing carbon) (“U.S State climate change is a Carbon…” 2019). Together, the states formed a coalition named the priority. Regional Greenhouse Gas initiative (“U.S State Carbon…” 2019). New York Department Globally, there has been also been significant action. Policy action of Environmental has been especially robust on the issue of simulating the economic Conservation realities of climate change. As of 2019, 40% of governments worldwide had adopted carbon pricing measures, either through direct taxes or cap-and-trade programs (both are discussed in-detail later in this briefing) (Plumer and Popovich 2019). On the issue of damages and adaptation, as well as impacts on total economic output, in 2016, nations from around the world came together to sign the Paris Agreement, which solidified expectations around how nations needed to approach adaptation and evolution of their economies; namely, by taking more action, sooner (Mogelgaard et al. 2015).

IDEOLOGICAL VIEWPOINTS

Conservative View To understand the different viewpoints on this issue, we must clearly establish the key ideological points of contention. In other words, what are the key ideologies, or political perspectives, that conservatives see as critical to this issue? For conservatives, there are two key ideological points of contention: 1) the threat that climate change poses to society, as well as 2) the economic harm associated with climate regulation/economic policy. On the first point, conservatives are largely split on whether climate change is an important threat to 34% of conservatives society - indeed, in 2020, only 34% of millennial and younger believe human Republicans believe human activity contributes to climate change activity contributes to (Funk and Kennedy 2020). With that said, conservatives are climate change generally in agreement that the economic harm associated with climate change regulation (such as adaptation policies) outweighs any benefit (Funk and Kennedy 2020). In 2020, 60% of conservative Republicans said that environmental regulations cost too many jobs, and 52% said that those policies are, overall, hurtful to the economy (Funk and Kennedy 2020). For each facet of this issue, then, overall, conservatives tend to resist any action, especially drastic action - either because they don’t Constituencies – A believe climate change warrants such action, or because the cost- body of voters in a benefit analysis isn’t favorable. (Of course, depending on their specific geographic constituencies, conservative members of Congress hold a number area that elect a of views.) Overall, a typical conservative would support a lower cost legislative of carbon, fewer (and less drastic) policies to address climate representative damage, and fewer government-created economic “incentives” to

tackle climate change. Liberal View For liberals, the ideological points of contention remain the same, but liberal perspectives on these points stand in stark contrast 73% of liberals believe to conservatives. First, liberals are largely in agreement that climate human activity change is an important threat to society - 73% believe that human contributes to climate activity contributes to climate change (Funk and Kennedy 2020). change Compared to conservatives, liberals are also much more likely to believe that environmental regulations or environmental economic policies’ economic benefits outweigh any costs - in 2020, 81% of Democrats Americans were in favor of stricter environmental regulations, and 85% of Democrats said that those policies either helped or wouldn’t affect the economy (Funk and Kennedy 2020). For each component associated with the economics of climate change, then, liberals tend to support action - either because they see

climate change as an important threat, or because they think the economy will benefit (or both). Once again, these are generalizations - different Congress(wo)men hold different positions, based on their distinct interests. Overall, a typical liberal would support a higher cost of carbon, more and more drastic policies to combat climate change and more government-created “incentives” to simulate the economic realities of climate change.

AREAS OF DEBATE

Now, we will turn to exploration of different policy pathways that the House Climate Crisis Committee - and Congress itself - may choose to implement. Specifically, in this section, we will review a number of proposed solutions to address the different facets of the economics of climate change. Ultimately, based on your US President representative’s perspective, you may choose to use some of these Donald Trump proposed policy solutions as the foundation for your bills at Harvard unilaterally reduced Model Congress Boston 2021. the social “cost” of carbon with an Establish A Congressional Subcommittee On The Social Executive Order Cost of Carbon Science As we’ve discussed, one of the most important issues in the realm of the economics of climate change is the social “cost” of carbon - a number that influences almost all climate policy. Estimating the social cost of carbon is currently at the discretion of the president, and during his term, President Trump ordered federal agencies to scrap the Obama-era cost of carbon and use a new cost of carbon ($1 - $7 per ton) (Plumer 2018). Thus far, Congress doesn’t have a formal channel for input. A potential solution is to establish a congressional subcommittee dedicated to estimating and putting forth a congressional recommendation for the social cost of carbon. A subcommittee is a Before President formal body that sits under a large, existing committee; in this case, Trump’s Executive such a subcommittee could be created to be politically neutral, with Order, the social an even number of Democrats and Republicans represented. This subcommittee could be especially impactful now, given that cost of carbon (as President Trump also dismantled the federal working group determined by US responsible for estimating the cost of carbon (Sylvan 2017). Indeed, agencies and this subcommittee could allow Congress to debate and discuss the President Obama) merits and flaws of different values (of the cost of carbon), and add was estimated to be another perspective to an extremely important debate. $50/ton Those in favor of such a solution may argue that climate change - and the social cost of carbon - is too important an issue to render to

a single authority, and this may be Congress’s best way of providing input and symbolically “checking” any single president, irrespective of political affiliation. Those against this solution may see

establishment of such a subcommittee as either 1) politically unimportant, given that the ultimate decision continues to lie with the Executive, or 2) unnecessary, which is consistent with a more skeptical view of the threat that climate change poses to society. Political Perspectives on this Solution Overall, conservatives would likely be less compelled to establish such a subcommittee, given that they tend to be less concerned about the potential environmental or long-term economic impacts of climate change. With that said, given the neutrality of such a solution - rather than imposing any type of law or regulation, simply creating a forum for discussion and, potentially, bipartisan action - may mean conservatives are less likely to immediately reject such a solution. Given their deep interest in tackling climate change, liberals would likely be more compelled to establish such a committee - if there was any opposition, it would be that that a committee doesn’t do enough - and given the neutrality of the solution, likely to endorse it. American oil American oil companies, like Exxon Mobil, are a relevant interest companies are a group as it relates to this issue. Given their interests - selling oil - they come to the arena with a more conservative ideological slant. With relevant interest that said, given that such a subcommittee would simply create yet group when it another avenue for lobbying, these oil companies may support comes to fighting creation of such a subcommittee. climate change Funding Climate-Resilient Infrastructure Nationwide We’ve also discussed how the loss and damages we’re sure to face as a result of our climate crisis - and the need for adaptation - is an especially pertinent issue under the economics of climate change. With that said, a potential solution is for Congress to authorize nationwide funding for climate-resilient infrastructure. While it is true that some states will face disproportionate damage, all states will be impacted. Moreover, nationwide funding can elevate the issue, and ensure that all states have resources available to them. It Climate-resilient can also allow Congress to provide states with its blueprint for infrastructure will climate-resilient infrastructure (types of infrastructure to build, and both create jobs with what in mind), and standardize this infrastructure. States can now and protect receive varying amounts of support, at the discretion of Congress. infrastructure in Arguments in favor of such a solution tend to focus on three key the future ideas. First, proponents tend to emphasize the importance of investing in such infrastructure, given the threat that climate change poses to existing infrastructure. Second, proponents argue that the investment will spur job growth and economic property. Finally, proponents believe that nationwide standardization on such an important issue is necessary. Arguments against such a solution tend to focus on two key ideas. First, critics tend to emphasize the need for state-specific solutions

to climate change damage response. Because climate change will impact states differently, a unified respond, these dissidents argue, is not necessary. In that vein, second, critics believe that climate change isn’t particularly pertinent, and thus, doesn’t warrant such an investment. They may worry about wasteful spending and a growing budget deficit. As the debt rises, more of the government budget goes to paying down interest on that debt – crowding out social spending on things like Social Security at a time when more and more Americans are preparing to retire. In addition to restricting the ability for the government to care for its citizens, this debt restricts the government’s ability to implement massive stimulus responses to economic emergencies like a widespread recession. Political Perspectives on this Solution Generally, conservatives would be much more likely to oppose such a solution. Given that this solution involves a national response, and government spending - two things that conservatives are generally wary of - support will likely be limited. Add to that the skepticism with which conservatives see climate change, and this solution would be labeled unfavorable, despite the potential for job growth. Liberals, on the other hand, would be much more likely to support such a solution. Liberals tend to favor federal government- centric, national responses, and immediate spending for future payoff, making such a solution right up their alley. Investing in Research to Combat Climate Threats to Worker Health Another important issue in the wheelhouse of the economics of climate change are the potential impacts on total economic output, largely the result of decreased worker productivity. Indeed, increasing warmth and precipitation (due to rising temperatures) will add to the risk of water and foodborne disease, as well as lead to the growth of insects that spread diseases like Zika and dengue (Cho 2019). Other health impacts - such as declining mental health - will also likely contribute to a drop in productivity (Cho 2019). How can we reduce these future economic costs? A potential solution is for the US Congress to invest in research Rising temperatures on how best to tackle climate-related threats to worker health. What will likely mean resources can ensure that workers aren’t faced with severe mental more insects health issues, and what innovations can we turn to to protect spreading susceptible populations from rising disease hazard? In legislation, dangerous diseases. Congress could allocate funds to the National Institutes of Health Columbia University’s (NIH), the US government’s research wing, to explore these/related Earth Institute issues. Arguments in favor of this solution tend to focus on two key ideas. First, the future economic benefits of such research can be enormous

- according to some estimates, we could save $160 billion in lost wages (Cho 2019). Second, no matter the ultimate consequences of climate change, proponents argue, this research will contribute to an important field of research and save American lives. Arguments against such a solution likely center around two other ideas. First, critics argue, if, as they believe, climate change isn’t a particularly serious threat, the supposed payoff of this investment may be much smaller (even if it does do some good). Second, opponents may see such additional government spending as wasteful, and at odds with their vision of a small, fiscally responsible federal government. Political Perspectives on this Solution With that said, conservatives would likely be aligned with the arguments against such a solution - and thus, would not be inclined to support such a solution. Indeed, they may see it as unnecessary (given their general view of climate change’s potential impacts), as Cap-and-Trade – A well as a waste of government dollars. Liberals, on the other hand, commonly-used tool may be much more aligned with the arguments in favor of such an to reduce carbon investment, and thus, more compelled by such a solution. To liberals, emissions by using a such research will likely be seen as proactive action by the federal market-based government to investigate the potential impacts of a serious issue. approach. The government issues or Carbon Taxes or Cap-and-Trade sells a limited number As we have discussed, a key issue associated with the economics of permits that grant of climate change is simulating the economic realities associated with holders (companies) climate change - because citizens, or corporations don’t “feel” the the right to emit an future cost associated with emissions of CO2, they aren’t amount of carbon psychologically incentivized to change behaviors (emit less carbon, specified by the for example). When the price of a good increases, generally, demand permit. Holders may for that good decreases - and demand increases for other, alternative invoke these permits goods. Thus, a potential solution is adding the future cost of using to continue emitting carbon to the present market price for carbon. There are two forms or may sell them to of carbon pricing - carbon taxes, and cap-and-trade. A carbon tax other firms. would be implemented by literally “taxing” carbon - so citizens/companies are charged an additional amount for emissions they produce. (Kaufman 2016). A cap-and-trade would set a cap, or a limit, on emission allowances for a period of time (based on the economic costs associated with emitting carbon) (Kaufman 2016). Dividend – These allowances would then be auctioned off, allowing the market Distribution of a to set the price for ideal carbon emissions (Kaufman 2016). surplus by a Arguments in favor of such solutions tend to focus on three key corporation/entity to ideas. First, such solutions are efficient - citizens and corporations shareholders can reduce carbon emissions as it works best for them. Second, a carbon tax would generate government revenue, which could, some lawmakers have argued, be paid back to citizens as a “carbon dividend” (Kaufman 2016). Finally, these economic simulations

will likely encourage corporations to invest in low-carbon technologies (Kaufman 2016). Arguments against such solutions tend to focus on two key ideas. First, critics argue that the economic cost associated with a tax or cap and trade program can and will outweigh any future environmental or economic benefit, because climate change is not as severe a threat as folks realize. Second, critics may see such a tax or program as symbolic of further government encroachment on individual rights and liberties. Another issue might be allocation – who gets credits in a cap-and- trade system, for example, might determine who supports a bill. A bill proposing such a system would have to balance the need to give enough credits to emitters to earn their support without giving them so many as to collapse incentives to restrict emissions. Political Perspectives on this Solution Generally, conservatives tend to align more with arguments against carbon taxes or a cap-and-trade program. They tend to be more skeptical about climate change as an issue, and more skeptical of the potential future economic benefits of such policies. On the other hand, liberals are generally in favor of such solutions, which they see as necessary government intervention with an economic payoff - in the present, and the future. Once again, American oil companies, like Exxon Mobil, are a relevant interest group in this debate, and come to the table with a more conservative ideological slant. With that said, these companies have, interestingly, shown some support for these policies, but that support has been overwhelmingly directed at policies that, in exchange for a tax, streamline environmental regulations (Teirstein 2019). International Climate Clubs Another issue associated with simulating the economic realities Climate Club – A of climate change is global cooperation. As discussed, it makes group of nations who financial sense for countries to work together, but because they don’t agree to collaborate “feel” the future economic cost of not doing so, they’re not on tackling climate psychologically incentivized to collaborate. A potential solution is change American economist William Nordhaus’s “climate clubs” (Nordhaus

2015). A “climate club” is a group of nations who agree to collaborate on tackling climate change (Nordhaus 2015). Then, they impose sanctions equivalent to the future cost of not collaborating on countries that refuse to join (a tax on not participating, so to speak) (Nordhaus 2015). Because the sanctions simulate the economic costs associated with not working together, countries are increasingly incentivized to cooperate, leading to an impactful international coalition (Nordhaus has shown, in his research, that this is indeed the case) (Nordhaus 2015).

Arguments in favor of Nordhaus’s solution argue that it’s a clever way to overcome free-riding in international climate policy and encourage countries to work together (Nordhaus 2015). They may also argue that it’s an effective way for the United States to take the global lead on climate policy. On the other hand, arguments against Free-riding – When Nordhaus’s solution emphasize the need for the United States to individuals/entities withdraw from global leadership, and focus more on addressing benefit from public issues closer to home. These critics may also tend to be skeptical of resources or action the economic benefits of global collaboration. (such as tackling climate change) but Political Perspectives on this Solution do not pay or Overall, conservatives would likely be less compelled by the contribute to those notion of a “climate club,” given that conservative thinking tends to resources/action be more skeptical of increased US global engagement. From an ideological perspective, conservatives may also find climate-related sanctions to be an attack on a country’s will, or freedom to choose its path. Liberals, on the other hand, would be more likely to see this as an effective way to reduce emissions, and allow the US to establish itself as a leader in the fight against climate change.

BUDGETARY CONSIDERATIONS

With the exception of funding climate-resilient infrastructure and investing in research to combat climate-generated threats to worker health, the solutions above don’t present serious budgetary considerations. There may be administrative costs associated with 44% of Americans establishing and administering a new subcommittee, but otherwise, support a policy to direct costs are relatively limited. The more prominent budgetary reduce greenhouse concern associated with the aforementioned solutions are indirect gas emissions economic costs, especially in the short-term (note that throughout this briefing, I’ve highlighted these costs, and if they are offset by through a carbon long-term economic benefits, as a point of debate and contention). tax When thinking through the budgetary aspects of your bill, then, it may be worth considering: are there ways your solution can addresses these potential costs, whatever their magnitude? (A good example of a solution that does this is a carbon tax that pays citizens a carbon dividend). As for the two solutions with direct budgetary concerns, keep in mind that funds don’t need to be excessive to be impactful.

CONCLUSION

In conclusion, the economics of climate change pose a number of issues for you - representatives of the Climate Crisis Committee - to tackle. As we briefly discussed, these issues - from determining the

social “cost” of carbon, to psychologically internalizing the future economic costs climate change presents - put forth a number of dilemmas for individual representatives to tackle. To what extent do we weight the future over the present? In what circumstances is it appropriate to turn to the federal government for action (and when does big government “overreach,” so to speak)? And perhaps, most fundamentally - what kind of threat does climate change actually pose to society? Whether ideological, economic, or scientific, it is these types of questions that, as a representative, you must consider as context when exploring this issue, and it those questions that will frame your unique perspective. No matter the level of concern, climate change is happening - and it most likely poses at least some threat to our society. Considering the economics of this issue is one of the most important areas to examine, because it’s likely the area that will most motivate tangible, impactful action. As you research your stances and policy solutions, remember - society hangs in the balance. In committee, it may be difficult to find common ground, but it’s a step that is necessary. One last, important note: when thinking through ideas for legislation, you should feel welcome to be creative, whether combining several of the solutions in this briefing, or using your own ideas (from your own research). This briefing is only meant to be a start to developing your policy stances.

GUIDE TO FURTHER RESEARCH

On that note, your research for Harvard Model Congress Boston 2021 should not end with this briefing! When pursuing further research, what should you be looking for? Now that you have an overview of this topic, consider exploring 1) the nuances of this topic, especially as they relate to potential legislation, 2) the stances of your individual congressional member on these issues/related issues, and 3) (given your political perspective,) solutions that you may want to spearhead in committee. Which solutions have compelling evidence that can make your policy proposal especially strong? To make your research successful, consider utilizing the following resources: 1) Explore the bibliography of this briefing. There are sources with a wealth of information not covered in-detail in this briefing. 2) Use Congress.gov: This website allows visitors to read, explore, and learn more about congressional legislation/policy proposals, whether passed, or just recently introduced.

3) Visit your congressional member’s personal website to understand their stance on these issues. As an example: https://underwood.house.gov. 4) To understand what pundits and private experts think, turn to the websites of policy think tanks and NGOs. Try to find proposed solutions advocated by both these experts and members of government.

GLOSSARY

Cap-and-Trade – A commonly-used tool to reduce carbon emissions by using a market-based approach. The government issues or sells a limited number of permits that grant holders (companies) the right to emit an amount of carbon specified by the permit. Holders may invoke these permits to continue emitting or may sell them to other firms

Climate Club – A group of nations who agree to collaborate on tackling climate change

Constituencies – A body of voters in a specific geographic area that elect a legislative representative

Dividend – Distribution of a surplus by a corporation/entity to shareholders

Externality – The cost of an activity on a third party, that has no control over the cost (such as society)

Free-riding – When individuals/entities benefit from public resources or action (such as tackling climate change) but do not pay or contribute to those resources/action

Gross Domestic Product (GDP) – The total value of goods and services produced in a country in one year; GDP is commonly used as a benchmark for economic health

Kyoto Protocol – An international treaty signed by President Bill Clinton in 1997; it called for reducing the emission of six greenhouse gases in 41 countries

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