The cost of climate change

Mood: Angry

I was reading the front page of “The Australian” today, and apparently scientists and economists are having a hard time predicting the exact economic impact of reducing our carbon emissions (and hence, obviously, saving the environment). They’re talking about power stations closing, household prices shifting, and so on.

So-called “free market capitalists” are decrying any moves to regulate anything as being damaging to the economy, cutting jobs. The free market will sort it out, they say.

I see one enormous problem with everyone’s thinking on this. The very reason why the capitalist system has been so successful: Change creates opportunity.

That’s the reason why you can’t model the impacts of this change: The outcomes of all these opportunities will be the product of the collective inventiveness of private industry to accomodate them, and nobody knows what radical means will be invented to do this, but invented they shall be.

What’s more, government already regulates heavily to prevent harm to society from industry. For example, they discourage you from killing anyone in the course of doing business. This had to be legislated, and is now in operation in most countries, and we seem to be doing just fine.

So, by extension, we shall accomodate the costs of not killing the environment. The only question is when those costs are imposed.

To summarise: If the government regulates to reverse the damage to our environment (whether by a tax, or regulation, or law), then surely this will create an economic cost. But it will also create a need, and therefore new economic opportunities. The whole point of the capitalist system is that it is resistant to these kinds of shocks – industries emerge to accomodate the new reality (i.e. high cost of emitting CO2) and everyone proceeds on their merry way and makes megabucks.

And sure, you need to keep the shock small enough that everybody doesn’t starve. But then, if it’s too small we’ll all starve as well – that much is certain.

To digress momentarily: In engineering, you always make things 3 times stronger than you need them to be, because there’s a chance things will get worse than you think.

Which is why it infuriates me so much that governments the world over are only legislating to implement the merest fraction of the required changes to stabilise our environment.

I suspect the reason for all this resistance and hyperbole is one simple fact: When environmental cost is finally factored into production costs and a new status quo emerges, the people who are now at the top will be at the bottom.

If you became rich from the Century of Oil, then I think it’s safe to say that the good times are over, one way or another. The only remaining question is whether we let them take us down with them.