Climate change occupies a central place in economics

At the beginning of January in San Antonio, dozens of doctoral students. Economists gathered in a small, windowless room in the recesses of a Grand Hyatt to hear brand-new research on the hottest topic at their annual conference: how climate change affects everything.

The papers in this session have focused on the impact of natural disasters on mortgage risk, rail safety, and even payday lending. Some participants had to stand at the back because the seats were already occupied. It was not an anomaly.

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

For those with a long-standing interest in environmental issues, the proliferation of climate-related materials is a welcome development. “It’s so nice not to be the crazy people in the room at the last session,” said Avis Devine, associate professor of real estate finance and sustainability at York University in Toronto, emerging from a discussion lively.

The conference, among the largest in the economics profession, tends to be a concentrate of what the field is focused on at any given time, and there is ample evidence that following the most warmest in recorded history, climate is in the spotlight. .

Articles have been published on the local economic impact of wind turbine manufacturing, the stability of power grids as they absorb more renewable energy, the effect of electric vehicles on housing choices, how smoke from forest fires puts a strain on household finances. Others have analyzed the benefits of a levee for Venice’s flood risk, the economic burden of uncertainty over climate policy, the flow of migrants displaced by extreme weather, how banks are exposed to emissions regulations and the impact of higher temperatures on factory productivity – just to name a few.

According to American Finance Association President Monika Piazzesi, half of the papers submitted to her group were about environmental, social and governance investing, broadly defined — and she didn’t have enough slots to include them all. (Each association requests and selects its own papers to present at the conference.)

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

“This is not just a series of issues, but a major, interrelated issue,” Dr Currie said. “Not only economists, but everyone realizes that this is a first-order problem and it affects most people in one way or another. This encourages everyone to want to work on it using their own lens.

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

It’s not as if the economy has ignored climate change. Research going back decades has predicted the impact of warming on gross domestic product – an “externality,” in economics parlance – and extrapolated from that a calculation of how much to tax a ton of carbon emissions.

“There was a time when at least some people thought, ‘Carbon is a non-internalized externality.’ We know how to solve this problem,” said Allan Hsiao, an assistant professor at Princeton University. They thought, “Maybe the problem is important,” he added, “but the underlying economic factors and tensions, the subtle and not-so-obvious mechanisms, weren’t there. »

This perception has changed. A solution favored by economists, which was to cap carbon emissions and create a trading market for permits, failed in 2009 under the weight of a weak economy, administrative complexity and a determined opposition. In recent years, a different approach has emerged: providing incentives for clean energy production, which pays more attention to political realities and the equitable distribution of costs and benefits, two themes which have also received more attention. attention in economic circles lately.

It also created a collision of new questions, providing material for a multitude of dissertation topics. “Now people realize that there is a lot of wealth,” Dr. Hsiao said.

The emergence of climate research in economics comes in part from established figures finding ways to pursue related questions within their own specialization. But much of the enthusiasm comes from newcomers to the field who are just building up their publication archives, learning to master the world of geospatial data from sources such as weather satellites, temperature sensors and historical precipitation records.

Take Abigail Ostriker, who is doing a postdoctoral fellowship at Harvard before starting this summer as an assistant professor at Boston University. She had spoken about climate as an area of ​​interest while in college in the 2010s, after the death of emissions trading legislation in Congress marked the beginning of ‘a relatively stagnant period for climate policy.

But she realized this during her graduate studies when she realized there was a lot of work to be done to determine how societies can deal with the effects of climate change – which is now a new normal and not a distant threat.

“I felt like climate change was here,” said Dr. Ostriker, who graduated with a paper about how Florida’s floodplain regulations have changed home construction. “I’ve been focusing on the adaptation side of things: where are we going to see these consequences, and what policies are going to protect people from these consequences, and are the policies going to perhaps exacerbate them in perverse ways?

The emerging generation of climate economists not only brings new ideas and new energies. This specialization is attracting more women and people of color to economics, helping to change the face of a field that has long been notoriously white and male, said Paulina Oliva, an associate professor at the University of Southern California who helped select articles for the American. Economic Association Program at the San Antonio Conference.

“That seemed particularly exciting to me, because you know how difficult it has been for the economy to have diversity,” Dr. Oliva said.

To attract young researchers to this field, it helps that the demand for climate economists is booming – in colleges and universities, but also in government agencies, private companies and nonprofit think tanks . A website that tracks job postings for academic economists around the world, EconJobMarket.orgshows that 5.5% of ads mentioned the phrase “climate change” in 2023. That figure was up from 1.1% a decade earlier, said Joel Watson, a professor at the University of California, San Diego, who runs the site.

These opportunities include numerous opportunities within the U.S. Government, which has been integration climate priorities across various agencies since President Biden took office in 2021. Climate impacts are now part of the cost-benefit analysis of new regulations, are considered in economic growth projections, and are reflected in forecasts budgetary.

The Inflation Reduction Act did not put a price on carbon, something economists have been advocating for decades. But Noah Kaufman, a researcher at Columbia University’s Center on Global Energy Policy, thinks his tools could be guided by economic analysis to transform the energy system – while mitigating the impact on communities that rely on energy production. fossil fuels and securing the benefits of renewable energy. energy investments are widely shared.

“Economists need to catch up with policymakers,” said Dr. Kaufman, who worked on climate policy at Mr. Biden’s Council of Economic Advisers. “It is unfortunate that we did not produce this literature decades ago. But considering we haven’t, it’s pretty exciting and a unique opportunity to try to be helpful now.