Climate change takes center stage in economics

Climate change takes center stage in economics

In early January, in San Antonio, dozens of Ph.D. Economists gathered in a small windowless room at the Grand Hyatt to hear brand new research on the hottest topic at their annual conference: how climate change is affecting everything.

in the papers this session Focus focused on the impact of natural disasters on mortgage risk, railway safety, and even payday loans. Some attendees had to stand in the back, as the seats were already filled. This was not an anomaly.

At nearly every block of time at the Allied Social Science Association conference – a gathering of dozens of economics-adjacent academic organizations recognized by the American Economic Association – there were multiple climate-related presentations to choose from, and most appeared equally popular.

For those who have long been focused on environmental issues, the proliferation of climate-related papers was a welcome development. “It’s great not to have crazy people in the room during the final session,” said Avis Devine, associate professor of real estate finance and sustainability at York University in Toronto, emerging from a lively discussion.

This conference, which is one of the largest conferences in the economics profession, is a distillation of what the field is focused on at any given time, and there is plenty of evidence that the hottest year in recorded history will be at the height of On the heels, climate is in the spotlight.

There were papers on the local economic impact of wind turbine manufacturing, the sustainability of electricity grids as they absorb more renewable energy, the impact of electric vehicles on housing choices, how wildfire smoke affects household finances. Others have linked the benefits of the sea wall to the risk of flooding in Venice, the economic pressures of uncertainty about climate policy, the influx of migrants displaced by extreme weather, the exposure of banks to emissions regulations, and the impact of high temperatures on factory productivity. Analyzed – just to name a few.

According to Monica Piagesi, president of the American Finance Association, half the papers assigned to her group were about environmental, social and governance investments, broadly defined – and they didn’t have enough space to include them all. (Each association solicits and selects its own papers for presentation at the conference.)

Janet Currie, incoming president of the American Economic Association, chose environmental economist Michael Greenstone of the University of Chicago to deliver the conference keynote address. He focused on the global challenge of moving towards renewable energy and its potential to reduce air pollution, which is particularly deadly in developing countries like India and Indonesia.

“This is not just a series of topics, but this is a big, interrelated problem,” Dr. Curry said. “Not just economists but everyone is realizing that this is a first-order problem, and it is affecting most people in some way or the other. This motivates everyone to work on it using their own particular lens.

Or as Heather Boushie, a member of the White House Council of Economic Advisers, said while moderating a panel on the macroeconomics of climate change: “We are all climate economists now.”

It is not that economics has ignored climate change. Decades of research have estimated the impact warming will have on GDP – an “externality” in economics parlance – and based this on a calculation on how many tonnes of carbon emissions should be taxed.

“There was a period of time in which at least some people thought: ‘Carbon is an internal externality. We know how to address it,'” said Alan Hsiao, an assistant professor at Princeton University. They were thinking, ” Maybe the issue is important,” he added, “but the underlying economics and tensions, the not-so-obvious, micro mechanisms weren’t there.”

That perception has changed. The solution preferred by economists, setting a limit on carbon emissions and creating a market for trading permits, failed in 2009 due to the weak economy, administrative complexity, and determined opposition. In recent years, a different approach has emerged: creating incentives for clean energy production that pays more attention to political realities and the equitable distribution of costs and benefits, two topics that have also recently attracted greater attention in economics circles. .

It has also generated a host of new questions, providing fodder for an abundance of dissertation topics. “Now people are realizing that there is a lot of prosperity here,” Dr. Hsiao said.

The surge of climate research in economics has come partly from established figures finding ways to pursue related questions as a result of their expertise. But most of the excitement comes from newcomers to the field who are just building their publishing records, learning how to sort through the universe of geospatial data from sources like weather satellites, temperature sensors, and historical rainfall records.

Take Abigail Ostriker, who is pursuing a postdoctoral fellowship at Harvard before starting as an assistant professor at Boston University this summer. While in college during the 2010s, his mind was soured on climate as an area of ​​focus after the death of emissions-trading legislation in Congress ushered in a relatively stable period for climate policy.

But when she realized that a lot of work had already been done on how society could deal with the impacts of climate change, she took it on again in graduate school — now that it’s the new normal, not a distant threat. .

“I felt like climate change is here,” said Dr. Ostriker, who earned her degree with paper How flood zone regulation shifted home construction in Florida. “I’m focusing my attention on the adaptation side of things – where are we going to see these outcomes, and what policies are going to protect people from the outcomes, and what policies are probably going to make them worse in deleterious ways ?”

The rising generation of climate economists is not just bringing new ideas and energy. Paulina Oliva, an associate professor at the University of Southern California, said the specialization is attracting more women and people of color to economics, helping to change the face of a field that has long been notoriously overwhelmingly white and male. Program of the Economic Association at the San Antonio Conference.

“This has been particularly exciting to me, because you know how hard it is for economics to have diversity,” Dr. Oliva said.

To draw young researchers to the field, it helps that demand for climate economists is growing rapidly – ​​in colleges and universities, but also in government agencies, private companies, and nonprofit think tanks. A website that tracks job postings for academic economists worldwide, EconJobMarket.orgshows that the phrase “climate change” was mentioned in 5.5 percent of ads in 2023. That’s up from 1.1 percent a decade ago, said Joel Watson, a professor at the University of California, San Diego, who runs the site.

Those occasions include a number of people in the US government who have been embedding Many agencies have climate priorities as President Biden takes office in 2021. Climate impacts are now part of the cost-benefit analysis of new regulations, incorporated into economic growth projections and reflected in budget forecasts.

The Inflation Reduction Act did not set a price on carbon, which economists had advocated for decades. But Noah Kauffman, a research scholar at Columbia University’s Center on Global Energy Policy, believes its tools for transforming the energy system can be guided by economic analysis — while minimizing impacts for communities dependent on fossil fuel production. can be done and the benefits of renewables can be ensured. Energy investments are widely shared.

“Economists need to align with policymakers,” said Dr. Kauffman, who worked on climate policy on Mr. Biden’s Council of Economic Advisors. “It is unfortunate that we did not produce this literature decades ago. But given that we didn’t, it’s quite exciting and now is a unique opportunity to try to be helpful.

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