Climate change could cost even more than we think

The potential costs of climate change, already the subject of heated debate, may actually be understated. It’s not just the potential disruptions to weather systems, agriculture and coastal cities; it’s that we may respond to those problems in stupid and destructive ways. As the philosopher and cartoon character Pogo said: “We have met the enemy and he is us.”
Consider how poorly we have responded to many non-climate-related problems. In the case of Brexit, for example, the Leave movement was arguably responding to some real problems. The European Union bureaucracy is too stringent, and perhaps the UK did not have an ideal arrangement with immigration. But Brexit is careening towards disaster, with no good plan on tap, the two major parties in splinters, the British pound declining, the Irish ‘Good Friday’ agreement at risk, and the UK seriously talking about food stockpiles and other emergency measures.
It would have been better if the British had responded to their country’s problems in a less extreme way, or simply learned to live with the problems they had. Instead, they voted for a rash and poorly thought-out remedy.
Similarly, you might think that supporters of President Donald Trump have legitimate concerns about illegal immigration and US unwillingness to stand up to China. Still, that did not require a presidential ‘remedy’ that has brought chaos and corruption to the White House and US foreign policy alike.
In short, the world increasingly appears to be reaching for extreme and imprudent remedies to admittedly complex problems. These overreactions do not seem to be mere accidents, but arise from some pretty fundamental features of polarised politics — namely, that discourse has become less rational and technocratic.
When it comes to climate change, all this plays out in interesting ways. In the US, imagine that many Florida residents have to leave their residences permanently, due to fiercer storms or rising sea level. The rational approach might involve well-functioning insurance markets, some public-sector transfers and compensation, and better infrastructure planning. The idea would be to limit the number of such moves or at least to lower their cost. That could prove very costly but essentially manageable. On the federal level, an infrastructure bill would invariably direct too much money to wasteful new projects in less populated states. Everywhere, the harsh, non-sympathetic tone of the debate will further corrode American politics.
I am struck by the costs of climate change suggested in the UN’s Intergovernmental Panel on Climate Change report, hardly a source of denialism. Its cost estimate — “1 to 5% of GDP for 4°C of warming” — is relatively reassuring. After all, global GDP is right now growing at more than 4 percent a year. If climate change cost ‘only’ 4 percent of GDP on a one-time basis, then the world economy could make up those costs with less than a year’s worth of economic growth. In essence, the world economy would arrive at a given level of wealth about a year later than otherwise would have been the case. That sounds expensive but not tragic.
Unfortunately, that is not the right way to conceptualise the problem. Think of the 4 percent hit to GDP, if indeed that is the right number, as a highly unevenly distributed opening shot. That’s round one, and from that point on we are going to react with our human foibles and emotions, and with our highly imperfect and sometimes corrupt political institutions.
Considering how the internal German politics has fragmented the EU, is it so crazy to think that climate change might erode international cooperation all the more? The true potential costs of climate change are just beginning to come into view.

— Bloomberg