William Nordhaus, who turned 82 this year, was the first economist in our time to attempt to quantify the cost of climate change. His climate-modeling wizardry, which won him the Nobel Memorial Prize in Economic Sciences in 2018, has made him one of the world’s most consequential thinkers. His ideas have been adopted by the Intergovernmental Panel on Climate Change, the U.S. Environmental Protection Agency, global risk managers, the financial services industry, and universities worldwide that teach climate economics. Nordhaus’s work literally could affect the lives of billions of people. This is because his quantification of the immediate costs of climate action — as balanced against the long-term economic harms of not acting — is the basis of key proposals to mitigate carbon emissions. It’s not an exaggeration to suggest that the fate of nations and a sizable portion of humanity depends on whether his projections are correct.
The Intergovernmental Panel on Climate Change has assumed Nordhaus is to be trusted. The integrated assessment models used at the IPCC are based on Nordhausian visions of adaptation to warming that only marginally reduces global gross domestic product. If future GDP is barely affected by rising temperatures, there’s less incentive for world governments to act now to reduce emissions.
Nordhaus’s models tell us that at a temperature rise somewhere between 2.7 and 3.5 degrees Celsius, the global economy reaches “optimal” adaptation. What’s optimal in this scenario is that fossil fuels can continue to be burned late into the 21st century, powering economic growth, jobs, and innovation. Humanity, asserts Nordhaus, can adapt to such warming with modest infrastructure investments, gradual social change, and, in wealthy developed countries, little sacrifice. All the while, the world economy expands with the spewing of more carbon.
His models, it turns out, are fatally flawed, and a growing number of Nordhaus’s colleagues are repudiating his work. Joseph Stiglitz, former World Bank chief economist and professor of economics at Columbia University, told me recently that Nordhaus’s projections are “wildly wrong.” Stiglitz singled out as especially bizarre the idea that optimization of the world economy would occur at 3.5 C warming, which physical scientists say would produce global chaos and a kind of climate genocide in the poorest and most vulnerable nations. [Continue reading…]