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The part of economics dealing with climate change goes much deeper than we have covered here. If you are interested, check out some of the references in this module. But, you should now have a working sketch of many of the main results.
Because the climate changes driven by the CO2 from our fossil fuels will make life harder for people in the future, as well as for at least some people now, there is a social cost of emitting carbon dioxide to the atmosphere. This cost can be understood by first discounting the future damages to their present value. But, if we spend money to reduce CO2 emissions and thus lower the damages from climate change, we are not spending money on consumption today, or on other investments for the future.
By using integrated assessment models, economists can compare the economic costs and benefits of different possible divisions of money among consumption, investment in the broad economy, and investment in reducing climate change. The optimal path is almost always found to involve doing some of all of those. Thus, rather surprisingly to some people, hard-nosed economics motivates serious responses to climate change, beginning as soon as possible. Typically, this response involves small actions now, increasing over the next decades, and relying on consistency in policies.
Because some of the damages of climate change are not yet accounted for quantitatively in these studies, they probably underestimate the size and speed of the optimal response. Similarly, if future economic growth is going to be more limited by the finite nature of the planet than assumed in the models, or by other issues, or if current calculations are overestimating the good that comes from increasing economic activity, then it is likely that more action to limit climate change would be recommended now. On the other hand, if future economic growth is faster than expected, or if we are underestimating the good from increasing economic activity, less action would be recommended now to reduce climate change. However, the balance of the literature seems to suggest overall that following the optimal path from the models or doing a little more now to reduce climate change is the economically best path.
Reminder - Complete all of the Module 10 tasks!
You have reached the end of Module 10! Double-check the to-do list in the Module Roadmap to make sure you have completed all of the activities listed there before you begin Module 11.