Submerged beneath the flood of information, initiatives, ideas, and pronouncements, it is hard to keep sight of what is needed for the goal of limiting global warming to 1.5°C. 

Surely there can be hardly anyone left who truly doubts that climate change is real and that it is here.  The recent experiences of severe weather events – floods, fires, droughts, and storms – visibly drive home what scientists have been saying for years:  global warming threatens life on a planetary scale; it is man-made, predictable and, although not reversible, its further escalation is mitigable. 

Today, it is rare to have conversations of the ‘but there was always climate change, and who says that this time is different’ type.  Instead, both public and private actors seem to be aggressively embracing the fight against climate change.  Rare indeed, these days, is the financial institution that does not promote its environmental, social, and governance (ESG) credentials. At the time of writing, world leaders are meeting for the COP26 Conference in Glasgow and expectations are simultaneously high and low.  There are high expectations for some further progress but low expectations of sufficient progress towards the goal of limiting global warming to 1.5°C. 

Submerged beneath the flood of information, initiatives, ideas, and pronouncements, it is hard to keep sight of what is needed for this goal.  It is easy to get lost, primarily because the science of climate change is complicated, requires very long-run forecasts, and involves large confidence intervals.  The same is true of the economics of climate change: separating the signal from the noise, filtering out the quality research is hard.  

Research published by CEPR and VoxEU has served this purpose for years: it filters and disseminates the economic research you ought to read.

A new CEPR eBook brings together 45 Vox columns on the economics of climate change, mostly published over the past 2–3 years (Weder di Mauro 2021). The sheer quantity is testimony to the acceleration of research, knowledge, and interest in the economics profession. I had to limit the number of columns chosen and to exclude many interesting pieces from this collection. The cut-off date was beginning of October 2021 and my selection bias was for recent and solutions-oriented contributions. However, in a few cases I have included older pieces, those that trace some of the ‘history of thought’. Below, I highlight a few selected insights on the economics of climate change as illustrated in this collection, but first I want to focus on the science of climate change. 

Download Combatting Climate Change: A CEPR Collection here.

Science first: Some numbers worth remembering 

To keep eyes on the goal, a few numbers from the latest report of the IPCC are extremely helpful.¹ The numbers are:  40, 300 and 2,390. Forty gigatonnes represents the current yearly emissions of CO₂ at the global level, 300 gigatonnes is the remaining carbon budget of global emissions, if the 1.5°C is to be reached with high (more than 80%) likelihood, and 2,390 gigatonnes of CO₂ is the estimate of cumulative historical emissions since 1850 already in the atmosphere.² These are sobering numbers for several reasons.  

First, the 2,390 gigatonnes shows the size of the historical burden. Past emissions mean that the world has already almost exhausted the total carbon budget to limit global warming to 1.5°C.  These emissions will remain in the atmosphere for hundreds of years to come and have already warmed the earth by about 1°C (over preindustrial levels). It is noteworthy that this historical burden was accumulated almost exclusively by high-income countries. 

Second, the 300 gigatonnes remaining budget is sobering because it is absolute. This is all that remains, full stop. This is how much this and any future generations have left if warming is to be limited to no more than 1.5°C.  At the current rate of 40 gigatonnes per year, the world has about eight years left. To my mind, this simple fact is such a powerful illustration of the challenge: the famous race to net zero needs a fast start if we are to limit global warming to 1.5°C. 

Were the world to give up on the 1.5°C target and set the limit to 1.7°C or 2°C, the remaining carbon budgets would amount to 550 and 900 gigatonnes, respectively.  This would allow a bit more time to get to net zero, as illustrated in Figure 1, but it does little to reduce the urgency to act and the environmental costs of any further delays.  

Figure 1 

Source: Author[s] calculations based on Table SPM.2 . IPCC Climate Change 21, The Physical Science Base, 

If we were to translate the remaining budgets into minutes until midnight, the clock would say that it is 7 minutes to midnight for 1.5°C, 11 minutes to midnight for 1.7°C, and 16 minutes to a midnight of 2°C warming. It is worth noting that although the relationship between emissions and warming seems to be near linear, the consequences of higher temperatures are not. Another way of looking at these numbers is to conclude that we need to develop carbon extraction technologies very fast and at scale.  Unfortunately, this technology does not seem to be ‘just around the corner’. 

Is the economics profession rising to the challenge?  

Given the size of the challenge, what are economists doing?  Not much, according to Andrew Oswald and Nicolas Stern (Chapter 1). They look at the number of papers on climate change published in top economics journals and conclude that the economics profession has been failing the world.  According to their count, the Quarterly Journal of Economics (QJE), for instance, had not published even one article on the economics of climate change until 2019 (a quick Google search for climate and QJE suggests that this may be unchanged, although it does reveal one QJE article published in 1917 on climate change as an element in the fall of Rome).