Climate Shock: The Economic Consequences of a Hotter Planet

Climate Shock: The Economic Consequences of a Hotter Planet

by Gernot Wagner, Martin L. Weitzman


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How knowing the extreme risks of climate change can help us prepare for an uncertain future

If you had a 10 percent chance of having a fatal car accident, you'd take necessary precautions. If your finances had a 10 percent chance of suffering a severe loss, you'd reevaluate your assets. So if we know the world is warming and there's a 10 percent chance this might eventually lead to a catastrophe beyond anything we could imagine, why aren't we doing more about climate change right now? We insure our lives against an uncertain future-why not our planet?

In Climate Shock, Gernot Wagner and Martin Weitzman explore in lively, clear terms the likely repercussions of a hotter planet, drawing on and expanding from work previously unavailable to general audiences. They show that the longer we wait to act, the more likely an extreme event will happen. A city might go underwater. A rogue nation might shoot particles into the Earth's atmosphere, geoengineering cooler temperatures. Zeroing in on the unknown extreme risks that may yet dwarf all else, the authors look at how economic forces that make sensible climate policies difficult to enact, make radical would-be fixes like geoengineering all the more probable. What we know about climate change is alarming enough. What we don't know about the extreme risks could be far more dangerous. Wagner and Weitzman help readers understand that we need to think about climate change in the same way that we think about insurance-as a risk management problem, only here on a global scale.

With a new preface addressing recent developments Wagner and Weitzman demonstrate that climate change can and should be dealt with-and what could happen if we don't do so-tackling the defining environmental and public policy issue of our time.

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Product Details

ISBN-13: 9780691171326
Publisher: Princeton University Press
Publication date: 04/19/2016
Pages: 272
Product dimensions: 5.00(w) x 8.00(h) x (d)

About the Author

Gernot Wagner is lead senior economist at the Environmental Defense Fund. Martin L. Weitzman (1942–2019) was professor of economics at Harvard University.

Read an Excerpt

Climate Shock

The Economic Consequences of a Hotter Planet

By Gernot Wagner, Martin L. Weitzman


Copyright © 2015 Princeton University Press
All rights reserved.
ISBN: 978-1-4008-8076-8



Thank Russian police corruption for footage that eluded NASA and every other space agency. On February 15, 2013, an asteroid as wide as 20 meters (66 feet) exploded in the sky above the Russian city of Chelyabinsk during the morning commute hours, causing a blast brighter than the sun. It didn't take long for some spectacular videos to appear online, mostly from dashboard cameras many Russian drivers have to protect themselves against the whims of traffic cops. The blast injured 1,500, most because of glass shattered by the explosion. It was a sobering wakeup call for space agencies to ramp up their asteroid detection and defense capabilities.

The money for such efforts is perennially in short supply. But the technical means are there, or at least they could be. A U.S. National Academy study estimates it would take ten years and around $2 or 3 billion to launch a test to deflect an asteroid bound to hit Earth. It may not be as glamorous as sending a man to the moon within the decade, but it may be at least as important.

While the Chelyabinsk asteroid would have been too small to deflect, it would have still been nice to know about it in advance. The chance of a larger asteroid hitting us is small, but it's there. Educated guesses put it as a 1-in-1,000-year event. That's a 10 percent chance each century. We haven't yet spent the money to know for sure. The fact, though, is that a few billion dollars would allow NASA and others both to catalogue the hazards and to defend against them. That's a small amount when measured against the costs of a potentially civilization-destroying threat. Around 65 million years ago it was a giant asteroid that caused the globe's fifth major extinction event, killing the dinosaurs.

Climate change isn't exactly hurtling toward us through outer space. It's entirely homegrown. But the potential devastation is just as real. Elizabeth Kolbert argues convincingly based on her book The Sixth Extinction how this time around: "We are the asteroid." In fact, by one recent scientific assessment, we are slated to experience global changes at rates that are at least ten times faster than at any point in the past 65 million years.

* * *

As Hurricane Sandy was whipping the Eastern Seaboard, leaving Manhattan below the Empire State Building partially flooded and almost entirely without power, New York governor Andrew Cuomo wryly told President Barack Obama that: "We have a 100-year flood every two years now." Hurricane Irene in August 2011 caused the first-ever preemptive weather-related shutdown of the entire, century-old New York City subway and bus system. It took only fourteen months for the second shutdown. Sandy hit in October 2012. All told, Irene killed 49 and displaced over 2.3 million. Sandy killed 147 and displaced 375,000.

New York, of course, is far from unique here. Typhoon Haiyan slammed the Philippines in November 2013, killing at least 6,000 people and displacing four million. Not even a year earlier, Typhoon Bopha struck the country, killing over a thousand and displacing 1.8 million. The European summer heat wave in 2003 killed 15,000 in France alone, over 70,000 in Europe. The list goes on, spanning both poor and rich countries and continents.

Society as a whole — especially in rich places like the United States and Europe — has never been as well equipped to cope with these catastrophes as it is today. As is so often the case, the poor suffer the most. That makes these recent deaths and displacements in places like New York all the more remarkable.

What likens these storms and other extreme climatic events to asteroids is that they both can be costly, in dollars and in deaths. The important and clear differences show that the climate problem is costlier still.

First the obvious: Major storms have hit long before humans started adding carbon dioxide to the atmosphere. However, warmer average temperatures imply more energy in the atmosphere implies more extreme storms, floods, and droughts. The waters off the coast of New York were 3°C (5.4°F) warmer than average during the days before Sandy. The waters off the coast of the Philippines were 3°C (5.4°F) warmer than average just as Haiyan was intensifying on its path to make landfall. Coincidence? Perhaps. The increase off New York happened at the surface. The increase off the Philippines happened 100 meters (330 feet) below. But the burden of proof seems to rest on those questioning the link from higher temperatures to more intense storms.

That's particularly true, since the best research goes much beyond drawing circumstantial links. The science isn't settled yet, but the latest research suggests that climate change will lead both to more and bigger storms. Though hurricanes are among the toughest climatic events to link directly to climate change, mainly because of how rare they are. It's easier to draw the direct link from climate change to more common events like extreme temperatures, floods, and droughts.

Think of it like drunk driving: Drinking increases the chance of a car crash, but plenty of crashes happen without elevated blood alcohol levels. Or liken it to doping in sports: No single Barry Bonds home run or Lance Armstrong Tour de France stage win can be attributed to doping, nor did doping act alone. Bonds still had to hit the ball, and Armstrong still had to pedal. But doping surely helped them hit farther and bike faster. Major storms, like home run records and multiple Le Tour wins, have happened before. None of that means steroids or elevated levels of red blood cells in an athlete's blood had no effect. Something similar holds for elevated levels of carbon dioxide in the atmosphere.

Researchers are getting increasingly better at using "attribution science" to identify the human footprint even in single events. The UK's National Weather Service, more commonly known as the Met Office, has a Climate Monitoring and Attribution team churning out studies that do just that. One such study found with 90 percent confidence that "human influence has at least doubled the risk of a heatwave exceeding [a] threshold magnitude" of mean summer temperature that was met in Europe in 2003, and in no other year since 1851. Links will only become clearer in the future, both because the science is getting better and because extreme weather events are becoming ever more extreme.

Governor Cuomo's "100-year flood every two years" comment may have been a throw-away line, but he was on to something. By the end of the century, we can expect today's 100-year flood to hit as frequently as once every three to twenty years. That's a century out, long after our lifetimes, but we know that we can't wait that long to act. Already, the annual chance of storm waters breaching Manhattan seawalls has increased from around 1 percent in the 19th century to 20 to 25 percent today. That means lower Manhattan can expect some amount of flooding every four to five years.

Unlike with asteroids, there's no $2-to-3-billion, ten-year NASA program to avoid the impact of storms and other extreme climatic events like floods and droughts. Nor is there a quick fix for less dramatic events like the ever faster rising seas. As a first line of defense, higher seawalls would surely help. But they can go only so far for so long. Higher seas make storm surges all the more powerful, and higher seas themselves come with plenty of costs of their own. Imagine standing in the harbor of your favorite coastal city. Then imagine standing there at the end of the century with sea levels having risen by 0.3 to 1 meters (1 to 3 feet). It will only be a matter of time before higher seawalls won't do, when the only option will be retreat.

By then, it will be too late to act. We can't re-create glaciers and polar ice caps, at least not in human timescales. The severity of the problems will have been locked in by past action, or lack thereof. Future generations will be largely powerless against their own fate.

One possible response that attempts to provide a quick fix is large-scale geoengineering: shooting small reflective particles into the stratosphere in an attempt to cool the planet. Geoengineering is far from perfect. It comes with lots of potential side effects, and it's no replacement for decreasing emissions in the first place. Still, it may be a useful, temporary complement to more fundamental measures. (We will start exploring the full implications of geoengineering in chapter 5.)

* * *

None of what we've talked about thus far even deals with the true worst-case scenarios. Having the climatic equivalent of ever more Chelyabinsk-like asteroids hit us is bad, but there are ways to cope. For relatively small asteroids, it's seeking shelter and moving away from windows. For relatively small climatic changes, it's moving to slightly cooler climates and higher shores. That's often easier said than done, but at least it's doable. For much more dramatic climatic consequences — such as a crippling of the world's productive agricultural lands — it's tough to imagine how we'd cope in a way that wouldn't cause serious disruptions.

Meanwhile, standard economic models don't include much of this thinking. Many observers regard average global warming of greater than 2°C (3.6°F) above preindustrial levels as having the potential to trigger events deserving of various shades of the label "catastrophe." Economists typically have a hard time making sense of that term. They need dollar figures. Does a catastrophe then cost 10 percent of global economic output? 50 percent? More?

While it's indeed necessary to translate impacts into dollars and cents, such benefit-cost analyses can act as only one guide for how society ought to respond. We should also take into account the potential for planet-as-we-know-it-altering changes in the first place. First and foremost, climate change is a risk management problem — a catastrophic risk management problem on a planetary scale, to be more precise.


If one wanted to imagine an all but intractable public policy problem, climate change would be pretty close to the ideal. Today's storms, floods, and wildfires notwith-standing, the worst effects of global warming will be felt long after our lifetimes, likely in the most unpredictable of ways. Climate change is unlike any other environmental problem, really unlike any other public policy problem. It's almost uniquely global, uniquely long-term, uniquely irreversible, and uniquely uncertain — certainly unique in the combination of all four.

These four factors, call them the Big Four, are what make climate change so difficult to solve. So difficult that — short of a major jolt of the global, collective conscience — it may well prove too difficult to tackle climate change just by decreasing emissions and adjusting to some of the already unavoidable consequences. At the very least we'll need to add suffering to the list. The rich will adapt. The poor will suffer.

Then there's the almost inevitable-sounding geoengineering, attempting a global-scale techno fix for a seemingly intractable problem. The most prominent geoengineering idea would have us deliver tiny sulfur-based particles into the stratosphere in an attempt to engineer an artificial sun shield of sorts to help cool the planet.

Everything we know about the economics of climate change seems to point us in that direction. Geoengineering is so cheap to do crudely, and it has such high leverage, that it almost has the exact opposite properties of carbon pollution. It's the "free-rider" effect of carbon pollution that has caused the problem: it's in no one's narrow self-interest to do enough. It's the "free-driver" effect that may push us to geoengineer our way out of it: it's so cheap that someone will surely do it based on their own self-interest, broader consequences be damned.

But let's not go there quite yet. Let's first tackle the Big Four in turn, beginning with why climate change is the ultimate "free-rider" problem:

Climate change is uniquely global. Beijing's smog is bad. So bad, that it comes with real and dramatic health effects that have prompted city officials to close schools and take other drastic actions. But Beijing's smog — or that in Mexico City or Los Angeles, for that matter — is mostly confined to the city. Chinese soot may register at measuring stations on the U.S. West Coast, much like Saharan dust may on occasion blow to central Europe. But all these effects are still regional.

That's not true for carbon dioxide. It doesn't matter where on the planet a ton is being emitted. Impacts may be regional, but the phenomenon is global and — among environmental problems — almost uniquely so. The ozone hole over the Antarctic is bad, but even at its height it has never reached the level of engulfing the globe. The same goes, say, for biodiversity loss or deforestation. These are regional problems. It's climate change that ties them together into phenomena with global implications.

The global nature of global warming is also strike one against enacting sensible climate policy. It's tough enough to get voters to enact pollution limits on themselves, when those limits benefit them and only them, and when the benefits of action outweigh the costs. It's a whole lot tougher to get voters to enact pollution limits on themselves if the costs are felt domestically but the benefits are global: a planetary "free-rider" problem.

Climate change is uniquely long-term. The past decade was the warmest in human history. The one before was the second-warmest. The one before that was the third-warmest. "Americans are noticing changes all around them," as the 2014 U.S. National Climate Assessment puts it. Changes are nowhere as evident as above the Arctic Circle: Arctic sea ice has lost half of its area and three-quarters of its volume in only the past thirty years. The Foreign Policy article describing "The Coming Arctic Boom" takes all of this as given. Then there are the visible changes all around. Again, from the National Climate Assessment: "Residents of some coastal cities see their streets flood more regularly during storms and high tides. Inland cities near large rivers also experience more flooding, especially in the Midwest and Northeast. Insurance rates are rising in some vulnerable locations, and insurance is no longer available in others. Hotter and drier weather and earlier snowmelt mean that wildfires in the West start earlier in the spring, last later into the fall, and burn more acreage." Climate change is here, and it's here to stay.

None of that should mask the fact that most of the worst consequences of climate change are still remote, often caged in global, long-term averages: global average surface temperature projections for 2100, or global average sea level projections for decades and centuries out. Strike two against sensible climate policy: the worst effects are far off — never mind that avoiding these predictions would entail acting now.

Climate change is uniquely irreversible. Even if we stopped emitting carbon tomorrow, we would have decades of warming and centuries of sea-level rise locked in. The eventual, full melting of large West Antarctic ice sheets may already be unstoppable. More extreme weather events are already here and will be with us for some time to come.

Over two-thirds of the excess carbon dioxide in the atmosphere that wasn't there when humans started burning coal will still be present a hundred years from now. Well over one-third will still be there in 1,000 years. These changes are long-term, and — at least in human timescales — virtually irreversible. Strike three.

* * *

As if three strikes weren't enough, there's another unique characteristic of climate change to round out the Big Four, and it may be the biggest one of them all: uncertainty — everything we know that we don't know, and perhaps more importantly, what we don't yet know we don't know.

Last time concentrations of carbon dioxide were as high as they are today, at 400 parts per million (ppm), the geological clock read "Pliocene." That was over three million years ago, when natural variations, not cars and factories, were responsible for the extra carbon in the air. Global average temperatures were around 1–2.5°C (1.8 to 4.5°F) warmer than today, sea levels were up to 20 meters (66 feet) higher, and camels lived in Canada.

We wouldn't expect any of these dramatic changes today. The greenhouse effect needs decades to centuries to come into full force. Despite the recent changes in the Arctic, ice sheets need decades to centuries to melt. Global sea levels take decades to centuries to adjust accordingly. Carbon dioxide concentrations may have been at 400 ppm three million years ago, whereas rising sea levels lagged decades or centuries behind. That time difference is important and points to the long-term nature and irreversibility of it all. See strikes two and three. But all that's small consolation, and there's an important twist to strike four.


Excerpted from Climate Shock by Gernot Wagner, Martin L. Weitzman. Copyright © 2015 Princeton University Press. Excerpted by permission of PRINCETON UNIVERSITY PRESS.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

Table of Contents

Preface to the Paperback Edition ix

Preface: Pop Quiz xi

Chapter 1. 911 1

Chapter 2. 411 30

Chapter 3. Fat Tails 48

Chapter 4. Willful Blindness 80

Chapter 5. Bailing Out the Planet 92

Chapter 6. 007 116

Chapter 7. What You Can Do 128

Epilogue: A Different Kind of Optimism 148

Acknowledgments 153

Notes 155

Bibliography 207

Index 243

What People are Saying About This

From the Publisher

"A remarkable book on climate change, Climate Shock is deeply insightful, challenging, eye-opening, thought-provoking, and sheer fun to read. It will help you to think clearly and incisively about one of the most important issues of our generation."—Jeffrey Sachs, author of The Price of Civilization

"Climate Shock is a brilliant, clear, rigorous, and to-the-point account of the problem of climate change and what we can and should do about it. The book's approach to risk—which factors in deep uncertainties—is vastly more sophisticated than the standard methods. An outstanding book."—Nassim Nicholas Taleb, author of The Black Swan and Antifragile

"The recent financial crisis was largely the result of an economy set up to privatize benefits and socialize costs. The same holds true for the climate crisis. Let's avoid doing to the planet what we did to the economy, and let's begin by taking the economics of climate change seriously. Climate Shock shows conclusively how bad the problem truly is and how we can fix it."—Van Jones, founder and president of Green for All and author of The Green Collar Economy

"Think climate change is a low-priority problem? Something to put off while we deal with more immediate threats? Then Climate Shock will open your eyes. Leading economists Wagner and Weitzman explain, in simple, understandable terms, why we face an existential threat in human-caused climate change. The authors lay out the case for taking out a planetary insurance policy, without delay, in the form of market mechanisms aimed at keeping carbon emissions below dangerous levels."—Michael E. Mann, author of The Hockey Stick and the Climate Wars

"Cutting through the fog of excuses, obfuscation, and misguided solutions, Climate Shock takes a clear look at the risks and dangers of inaction on climate change. Wagner and Weitzman show the urgent need for fact-based, rational analysis of big environmental challenges so that we can move forward in the quickest and most practical way possible."—Mark R. Tercek, president and CEO of the Nature Conservancy and author of Nature's Fortune

"Wagner and Weitzman's Climate Shock explores two of the most alarming risks from climate change: unpredictable catastrophes and the all-too-foreseeable human tampering with the environment. They explain how the same political barriers to addressing the problem will leave nations racing to deflect the damage through geoengineering. For anyone interested in the new risk landscape of our changing climate, Climate Shock is a compelling and highly recommended read."—Ian Bremmer, president of the Eurasia Group

"In this clear and engaging exegesis on the risks from global warming, Wagner and Weitzman show that our options for avoiding calamity rapidly narrow toward a few unappetizing possibilities if we don't slash carbon emissions comprehensively and fast."—Michael Oppenheimer, Princeton University

"Climate Shock fascinates, infuriates, motivates. It's an illuminating guidebook to how the climate debate will unfold over the coming decade. But first and foremost, it's a call to action. Now."—Fred Krupp, president of the Environmental Defense Fund

"Climate Shock is a clear, well-argued introduction to the economics of climate policy."—David Keith, author of A Case for Climate Engineering

"Do you want to be challenged and stretched? Climate Shock gives broad perspectives and logical tools that will let you think through the threat of climate change on the level of the best minds on this planet."—Peter C. Goldmark Jr., former president of the Rockefeller Foundation and former CEO of the International Herald Tribune

"What happens when one of the world's leading economists who thinks seriously about global climate change gets together with one of the world's top writers about matters environmental and economic? Climate Shock. From the first page to the last, this important, new book is both exceptionally interesting and surprisingly fun. Now, that's shocking!"—Robert N. Stavins, Harvard University

"Climate Shock demolishes the argument made by climate change skeptics for business as usual."—Ted Steinberg, author of Gotham Unbound

"I cannot think of a better team than Wagner and Weitzman to communicate the risks of inaction on climate change. Their unbiased and informative book Climate Shock dives right into the complexities of the issues and explains them clearly. It provides new and invigorating context for readers."—Juan Moreno-Cruz, Georgia Institute of Technology

"Climate Shock looks at the key issues in climate change and climate change policy and recommends what actions readers can take to help prevent devastating outcomes. Wagner and Weitzman don't hold back from explaining complicated topics and their arguments are backed by references from the latest scientific and economic literature. This is by far the most engaging presentation of this topic that I have read."—Kenneth Gillingham, Yale University

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