'We are all climate economists now'
In early January, dozens of Ph.D. Economists huddled in a small, windowless room in the alcoves of a Grand Hyatt to hear brand new research on the hottest topic of their annual conference: how climate change affects everything.
The papers inside this session focusing on the impact of natural disasters on mortgage risk, railway safety and even personal loans. Some attendees had to stand at the back because the seats were already occupied. It was not an anomaly.
Nearly every time slot at the Allied Social Science Associations conference — a gathering of dozens of economics-related 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 articles has been a welcome development. “It's so nice not to be the crazy people in the room during the last session,” said Avis Devine, associate professor of real estate finance and sustainability at York University in Toronto, 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 climate is in the spotlight on the heels of the hottest year on record . .
There were articles on the local economic impact of wind turbine production, the stability of electricity grids as they absorb more renewable energy, the effect of electric vehicles on housing choices, and how wildfire smoke is putting pressure on household finances. Others analyzed the benefits of a sea wall for Venice's flood risk, the economic drag of climate policy uncertainty, the flow of migrants displaced by extreme weather, how banks are exposed to emissions regulations and the impact of higher temperatures on factory productivity . to name a few.
According to American Finance Association President Monika Piazzesi, more than half of the articles submitted to her group were about environmental, social, and governance investments, broadly defined — and she didn't have nearly enough space to include them all to include. (Each association requests and selects its own papers for presentation at the conference.)
Janet Currie, the new president of the American Economic Association, chose an environmental economist, Michael Greenstone of the University of Chicago, to give the conference's keynote lecture. He focused on the global challenge of switching to renewable energy and the related potential to reduce air pollution, which is especially deadly in developing countries such as India and Indonesia.
“This is not just a series of issues, but it is a big, interrelated problem,” said Dr. Curry. “Not just economists, but everyone realizes that this is a major problem, and that it affects most people in one way or another. That inspires everyone to want to work on it with their own lens.”
Or as Heather Boushey, a member of the White House Council of Economic Advisers, put it when she moderated a panel on the macroeconomics of climate change: “We are all climate economists now.”
It's not that the economy has ignored climate change. Research going back decades has predicted the toll warming will take on gross domestic product – an “externality” in economics jargon – and extrapolated from that a calculation of how much a ton of CO2 emissions should be taxed.
“There was a period when at least some people would think, 'Carbon is a non-internalized externality. We know how to handle that,” 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 not-so-obvious, subtle mechanisms, weren't there.”
That perception has changed. A solution favored by economists, setting a cap on carbon emissions and creating a market for trade permits, failed in 2009 under the weight of a weak economy, administrative complexity and determined opposition. In recent years, a different approach has emerged: providing incentives for the production of clean energy, paying more attention to political reality and the fair distribution of costs and benefits, two themes that have also received more attention recently in economic circles.
It has also led to a collision of new questions, providing fodder for a plethora of dissertation topics. “Now people are realizing that there is just a lot of wealth out there,” explained Dr. Hsiao out.
The rise of climate research in economics is partly due to established figures finding ways to answer related questions as an extension of their own specialization. But much of the enthusiasm comes from newcomers to the field, who are only now building their publishing credentials and learning how to organize the universe of geospatial data from sources like weather satellites, temperature sensors, and historical rainfall data.
Take Abigail Ostriker, who is doing a postdoctoral fellowship at Harvard before starting as an assistant professor at Boston University this summer. She had soured on climate as an area of focus during her studies in the 2010s, after the passing of emissions trading legislation in Congress ushered in a relatively stagnant period for climate policy.
But she picked it up again when she realized there was a lot of work in figuring out how societies can deal with the impacts of climate change – now a new normal, not a distant threat.
“I felt like climate change is happening,” said Dr. Ostriker, who graduated with a degree paper about how floodplain regulation in Florida changed housing development. “I've focused my attention on the adaptation side of things: where are we going to see these consequences, and what policies are going to protect people from the consequences, and are policies perhaps going to make these consequences worse in perverse ways?”
The emerging generation of climate economists not only brings new ideas and energy. The specialization is drawing more women and people of color into the economy, changing 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 helped select papers for the American economy. Program of the Economic Association at the San Antonio Conference.
“That was particularly exciting to me, because you know how difficult it has been for the economy to have diversity,” said Dr. Oliva.
To attract young researchers into the field, it helps that the demand for climate economists is growing enormously – at colleges and universities, but also at government agencies, private companies and non-profit think tanks. A website that tracks job openings for academic economists around the world, EconJobMarket.orgResearch shows that in 2023, 5.5 percent of advertisements mentioned the term 'climate change'. That was up from 1.1 percent a decade earlier, said Joel Watson, a professor at the University of California, San Diego, who runs the site.
These opportunities include, and have included, many in the U.S. government embed climate priorities across a range of agencies since President Biden took office in 2021. Climate impacts are now part of the cost-benefit analysis of new regulations, factored into economic growth forecasts and reflected in budget projections.
The Inflation Reduction Act did not set a price on carbon, which economists had been calling for for decades. But Noah Kaufman, a researcher at Columbia University's Center on Global Energy Policy, thinks its tools can be guided by economic analysis to transform the energy system — while softening the impact on communities dependent on fossil fuel production and ensure that the benefits of sustainable energy are realised. energy investments are widely shared.
“Economists need to catch up with policymakers,” said Dr. Kaufman, who worked for a time on climate policy at Mr. Biden's Council of Economic Advisers. “It's a shame we didn't produce this literature decades ago. But since that is not the case, it is quite exciting and a unique opportunity to try to be helpful now.”