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When Climate Change Becomes a Climate Catastrophe

Peter R. Orszag is a Bloomberg View columnist. He is a vice chairman of investment banking at Lazard. He was President Barack Obama’s director of the Office of Management and Budget from 2009 to 2010 and the director of the Congressional Budget Office from 2007 to 2008.
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"Go Set a Watchman" isn't the only book this year that brings new perspective to an old story line. "Climate Shock: The Economic Consequences of a Hotter Planet" should shift our narrative on climate change.

The old story line: People need to worry about climate change because doubling the atmosphere's concentration of carbon dioxide relative to its preindustrial level would probably raise global average temperatures by 2.7 to 8 degrees Fahrenheit.

The new story line: We should worry because of the risk that the changes will be catastrophic.

Acting now is thus urgent not because of the expected outcome, but because of the risks associated with the worst possible outcomes, as authors Gernot Wagner of the Environmental Defense Fund and Martin Weitzman of Harvard University well explain.

Let's put some numbers to this argument. Preindustrial levels of carbon dioxide amounted to 280 parts per million. Today, we're at 400 ppm, and the annual increase is 2 ppm. Without drastic action, we will reach 700 ppm by 2100, according to the International Energy Agency.

Wagner and Weitzman helpfully translate the scientific research on climate sensitivities into probabilities of very bad outcomes, and they conclude that at 700 ppm, there is an 11 percent chance of an increase in global temperature exceeding 11 degrees Fahrenheit.

What would happen with that kind of temperature increase? No one knows exactly, but Wagner and Weitzman properly view the outcome as "near-certain disaster." "'Catastrophic' no longer seems to do it justice," they say.

And therein lies the book's most essential point. That amount of climate change is, in their words, "a blind planetary gamble." They continue:

Devastating home fires, car crashes, and other personal catastrophes are almost always much less likely than 10 percent. And still, people take out insurance to cover against these remote possibilities…. Risks like this on a planetary scale should not -- must not -- be pushed onto society.

Yet action to address the risk is complicated because of what Wagner and Weitzman call the Big Four problems: Any one country's effort to prevent climate change alone would be ineffective; political systems struggle to address long-term challenges; by the time humanity decides to act aggressively, it may be too late; and the risks are highly uncertain, which makes them easy to dismiss.

The right insurance policy against the risk of catastrophic climate change involves either a significant tax on carbon or a cap-and-trade system. Either one would put a price on carbon emissions, which is crucial to changing behavior and spurring environmentally friendly innovation. Neither one is likely in the near future, though, which is why third- and fourth-best steps are still needed.

Wagner and Weitzman have some policy recommendations, including electricity-grid reform and higher gas taxes. But the real power of their book is its explanation of the right way to think about climate change. Do we really want to take an 11 percent gamble with the planet?

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author on this story:
Peter R. Orszag at porszag3@bloomberg.net

To contact the editor on this story:
Mary Duenwald at mduenwald@bloomberg.net