Thursday, July 25

Climate change is at the center of attention in economics

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

Papers this session focused on the impact of natural disasters on mortgage risk, rail safety, and even payday lending. Some participants had to wait in line because the seats were already taken. It wasn’t an anomaly.

Almost every moment of the Allied Social Science Associations conference — a gathering of dozens of economics-adjacent academic organizations recognized by the American Economic Association — had multiple climate-related presentations to choose from, and most seemed equally popular.

For those who have long focused on environmental issues, the proliferation of climate-related documents has been a positive development. “It’s so nice not to be the crazy person in the room during the last session,” said Avis Devine, associate professor of real estate finance and sustainability at York University in Toronto, emerging after a lively discussion.

The conference, which is among the economics profession’s largest, tends to be a distillation of what the field is fixated on at any given time, and there’s plenty of evidence that, in the wake of the hottest year in history, the climate is in the spotlight.

There were papers on the local economic impact of wind turbine manufacturing, on the stability of power grids as they absorb more renewable energy, on the effect of electric vehicles on housing choices, on how wildfire smoke puts a strain on family finances . Others have analyzed the benefits of a sea wall for flood risk in Venice, the economic burden of climate policy uncertainty, the flow of migrants displaced by extreme weather, how banks are exposed to emissions and the impact of higher temperatures on factory productivity – to name a few.

According to the president of the American Finance Association, Monika Piazzesi, about half of the documents presented to her group were on environmental, social and governance investments, broadly defined – and she didn’t have enough space to include them all. (Each association solicits and selects its own documents to present at the conference.)

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

“This is not just one set of topics, but it’s one big interconnected problem,” Dr. Currie said. “Not just economists but everyone else is realizing that this is a problem of the first order, and that it affects most people in some way. This inspires everyone to want to work on it using their own particular 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 that the economy had ignored climate change. Research dating back decades has predicted the toll that warming will have on gross domestic product – an “externality,” in economics parlance – and from that extrapolated a calculation for how much a ton of carbon emissions should be taxed.

“There was a time when at least some people would have thought, ‘Carbon is a non-internalized externality. We know how to deal with this problem,” said Allan Hsiao, an assistant professor at Princeton University. They thought, “Maybe the issue is important,” he added, “but the underlying economics and tensions, the subtle and not-so-obvious mechanisms , there were not”.

That perception has changed. A solution favored by economists, to cap carbon emissions and create a market for trading permits, failed in 2009 under the weight of a weak economy, administrative complexity and determined opposition. In recent years, a different approach has emerged: the provision of incentives for the production of clean energy, which pays more attention to political realities and the fair distribution of costs and benefits, two issues that have recently attracted more attention in economic circles as well.

It also created a collision of new questions, providing fodder for a treasure trove of thesis topics. “Now people are realizing that there is actually a lot of wealth,” Dr. Hsiao explained.

The surge in climate research in economics stems in part from established figures who are finding ways to pursue related questions as an offshoot of their own specialization. But much of the excitement comes from newcomers to the field who are just now building their publication records, learning to untangle the universe of geospatial data from sources like weather satellites, temperature sensors, and historical precipitation records. .

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

But she picked it up again in graduate school when she realized there was a lot of work to be done to understand how societies can address the effects of climate change – now a new normal, not a distant threat.

“I felt like climate change had arrived,” said Dr. Ostriker, who graduated with a paper on how floodplain regulation in Florida shifted home building. “I turned my attention to the adaptation side of things: where will we see these consequences, and what policies will protect people from the consequences, and will the policies perhaps exacerbate them in perverse ways?”

The emerging generation of climate economists is not just bringing new ideas and energy. 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 has Helped select papers for the American Economic Association program at the San Antonio conference.

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

To attract young researchers to the 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.org, shows that 5.5% of ads mentioned the phrase “climate change” in 2023. This is up from 1 .1% of ten years earlier, said Joel Watson, a professor at the University. of California, San Diego, which operates the site.

These opportunities include many people in the US government, which has incorporated climate priorities into a number of agencies since President Biden took office in 2021. Climate impacts are now part of the cost-benefit analysis of new regulations, taken into account in economic growth projections and reflected in budget forecasts.

The Inflation Reduction Act did not put a price on carbon, as economists had argued for decades. But Noah Kaufman, a researcher at Columbia University’s Center on Global Energy Policy, believes his tools could be driven by economic analysis to transform the energy system while cushioning the impact for communities that depend on fossil fuel production and ensuring the benefits of renewable energy. energy investments are widely shared.

“Economists need to catch up with politicians,” said Dr. Kaufman, who worked on climate policy at Biden’s Council of Economic Advisers. “It’s a shame we didn’t produce this literature decades ago. But since we haven’t, it’s pretty exciting and a unique opportunity to try to help now.”