Global Warming: Who Loses—and Who Wins? : Adaptation

Last October 2007, the treasury office of the United Kingdom estimated that unless we adapt, global warming could eventually subtract as much as 20 percent of the gross domestic product from the world economy. Needless to say, if that happens, not even the cleverest portfolio will help you. This estimate is worst-case, however, and has many economists skeptical. Optimists think dangerous global warming might be averted at surprisingly low cost (see “Some Convenient Truths,” September 2006). Once regulations create a profit incentive for the invention of greenhouse-gas-reducing technology, an outpouring of innovation is likely. Some of those who formulate greenhouse- gas-control ideas will become rich; everyone will benefit from the environmental safeguards the ideas confer.
Enactment of some form of binding greenhouse-gas rules is now essential both to slow the rate of greenhouse-gas accumulation and to create an incentive for inventors, engineers, and businesspeople to devise the ideas that will push society beyond the fossil-fuel age. The New York Times recently groused that George W. Bush’s fiscal 2007 budget includes only $4.2 billion for federal research that might cut greenhouse-gas emissions. This is the wrong concern: Progress would be faster if the federal government spent nothing at all on greenhouse-gas-reduction research—but enacted regulations that gave the private sector a significant profit motive to find solutions that work in actual use, as opposed to on paper in government studies. The market has caused the greenhouse-gas problem, and the market is the best hope of solving it. Offering market incentives for the development of greenhouse-gas controls—indeed, encouraging profit making in greenhouse-gas controls—is the most promising path to avoiding the harm that could befall the dispossessed of developing nations as the global climate changes.
Yet if global-warming theory is right, higher global temperatures are already inevitable. Even the most optimistic scenario for reform envisions decades of additional greenhouse-gas accumulation in the atmosphere, and that in turn means a warming world. The warming may be manageable, but it is probably unstoppable in the short term. This suggests that a major investment sector of the near future will be climate-change adaptation. Crops that grow in high temperatures, homes and buildings designed to stay cool during heat waves, vehicles that run on far less fuel, waterfront structures that can resist stronger storms—the list of needed adaptations will be long, and all involve producing, buying, and selling. Environmentalists don’t like talk of adaptation, as it implies making our peace with a warmer world. That peace, though, must be made—and the sooner businesses, investors, and entrepreneurs get to work, the better.
Why, ultimately, should nations act to control greenhouse gases, rather than just letting climate turmoil happen and seeing who profits? One reason is that the cost of controls is likely to be much lower than the cost of rebuilding the world. Coastal cities could be abandoned and rebuilt inland, for instance, but improving energy efficiency and reducing greenhouse-gas emissions in order to stave off rising sea levels should be far more cost-effective. Reforms that prevent major economic and social disruption from climate change are likely to be less expensive, across the board, than reacting to the change. The history of antipollution programs shows that it is always cheaper to prevent emissions than to reverse any damage they cause.
For the United States, there’s another argument that is particularly keen. The present ordering of the world favors the United States in nearly every respect—political, economic, even natural, considering America’s excellent balance of land and resources. Maybe a warming world would favor the United States more; this is certainly possible. But when the global order already places America at No. 1, why would we want to run the risk of climate change that alters that order? Keeping the world economic system and the global balance of power the way they are seems very strongly in the U.S. national interest—and keeping things the way they are requires prevention of significant climate change. That, in the end, is what’s in it for us.