Is climate change actually solvable?

The short-term nature of politics means climate change is constantly pushed to the bottom of the agenda – is it already too late to save the planet?

In today’s scientific landscape, there’s a growing consensus that the climate crisis is a pressing reality with tangible effects on the future of our world. Across the globe, ice is melting at an accelerated pace, leading to rising sea levels that pose challenges for coastal areas. Biodiversity is facing significant and increasing threats, potentially disrupting ecosystems. There is growing evidence suggesting that extreme weather events may become more frequent. And the scientific community is certain that this is due to humans emitting greenhouse gases. Yet global politics is not reacting fast enough. Let’s investigate why that is and whether humanity could solve climate change.

The crux of the matter revolves around what economists term the “free rider problem.” This phenomenon is a form of market failure where those who benefit from certain goods, services or policies have no incentive to pay for them. In the case of the climate crisis, all countries would benefit if they united to enforce appropriate climate policy. Yet the marginal benefit of one country doing so alone is minimal, acting as a counter-incentive. For instance, if all countries except Scotland move to net zero, Scotland would still benefit, but wouldn’t have to pay the costs.

To make things worse, the free rider problem describing climate policy exists in not one, but two dimensions: national and generational. We, as a generation, have little incentive to pay for climate policies whose benefits will be largely felt by future generations. That, combined with the generally short-lived nature of politics, may render necessary climate policy impossible.

Before discussing a politically plausible solution, let’s look at what the ideal would be. The climate crisis harms the global economy and, thereby, the global population. On the other hand, climate policy can also harm the economy. As a result, the ideal solution balances out the costs of the climate crisis and the costs of climate policy.

Determining this equilibrium point of minimal social cost has been a field of intensive debate, called ‘Climate Economics.’ One of the most prominent names in this field is Professor William Nordhaus, who won the Nobel Prize for Economics in 2018 for “integrating climate change into long-run macroeconomic analysis.” He developed the so-called DICE model, which seeks to estimate the economic costs of the climate crisis.

Among scientists using this model, there is a debate as to which basic assumptions that directly inform the outcome of the model are most accurate. One Nature study implemented the DICE model and concluded that it is consistent with the UN’s 2°C target.

So how do we get there? According to Nordhaus, the most efficient solution would be a harmonised carbon tax, i.e. a carbon tax that is the same in every country. His most recent research suggests that, by 2040, such a tax should have risen to a point where one ton of CO2 costs $90 in real terms – a far cry away from the current global average of $3.

It is obvious that all the world’s countries are not currently uniting to implement a harmonised carbon tax. According to Nordhaus, the easiest way to incentivise these policies would be to form a so-called ‘Carbon Club,’ a group of nations with common external tariffs that unite to levy a carbon tax. The tariffs exist to incentivise other countries to join the club. In fact, a similar scheme already exists: look no further than the EU, where there is a common tradable permit scheme.

But what can individual countries like Scotland do? Investing in renewable energy infrastructure, research and development as an individual nation is not the global economic ideal, but it is a much more realistic starting point. Ultimately, it can even be beneficial for the domestic economy: global demand for these technologies will certainly increase in the future, so taking the lead may increase Scotland’s exports in the long run. For instance, Scotland already produces more electricity than it needs from offshore wind, potentially making it a key supplier for other nations. As the First Minister puts it, “floating offshore wind is a huge opportunity for Scotland.” And he may well be right with his approach to climate change.