Thomas Schelling: The Economics of Global Warming

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The real global challenge facing us will be organizing to reduce carbon emissions and provide help to poor countries coping with climate change. The worst, but not the most likely, consequences of climate change could be rising sea levels: there is grounded ice in Antarctica that, if loosed from its moorings, is worth five or six meters of sea level, enough to sink Stockholm, Manhattan, or London, or to oblige them to build levees to escape inundation, and to oblige millions of Bangladeshis and others to abandon their homes and workplaces and to migrate. (Levees cannot save Bangladesh; they leave no escape for the freshwater floods that need to reach the ocean.)

The most likely consequences of climate change will be severe impacts on food production in the developing world. We can worry about urban heat waves, polar bears, and forest fires, but the worst effects are almost certainly going to be on food production in the poor countries, where half or more of the population depends on growing its own food.

Estimates of lost world product due to climate change are moderate because the poor have so little to lose. More than a billion people, maybe 2 billion, are estimated to live on less than the equivalent of $2 per day. If a billion of those poorest people lost half their income, it would be an overwhelming tragedy, a true catastrophe, worse than all the earthquakes, floods, tsunamis, landslides, and fires of the past decade happening every year. But those billion people together would lose only $365 billion per year. That is less than 1 percent of world income! They have so little to begin with that what they can lose doesn’t amount to much of a statistic. But they can lose tragically.

In a developed nation like the United States, or most of Europe, agriculture is less than 5 percent of gross national product; nearly all the rest of Western income is substantially impervious to climate, or may benefit slightly from warming. The U.S. has scientific assistance to agriculture and experience with climates and crops across the country, and can respond with appropriate changes in crops and techniques of cultivation. Developing countries currently have little, if any, such capacity to adapt.

World incomes will surely continue to rise, as will population. One of the notable changes in consumption with rising incomes is demand for meat. Already demand for meat in China is hugely increased in urban areas. The production of a single calorie of meat, depending on whether it is beef, pork, or chicken, requires four to 10 calories in animal feed. The shift toward meat will raise food prices everywhere; the rich may have to eat a little less meat, the poor will have to pay more for their rice and bread. Consumption inequalities between the world’s rich and poor will increase.

Population continues to increase in the developing world, though less than predicted. Unpredicted by demographers a couple of decades ago, declining population in almost every developed country leads not only to smaller populations, but to a shift in age structure toward the elderly. Even the developing world is undergoing, not uniformly, unexpected declines in fertility and birthrates. But still the populations of the developing world are increasing: more people to feed, and a likely shortfall in food production.

As an example, there is much alarm about the shrinking of glaciers worldwide, especially in Greenland, but also in the Alps and the Andes. But the problem is not glaciers. It is that what ought to be snowfall is sometimes coming as rain, and the snowpack that ought to wait until late spring or early summer to melt is, in fact, melting earlier; the result is that what traditionally has been available for irrigation is lost to the oceans before food crops can use the water. This is crucial in China, South Asia, Chile, Peru, Colorado, and California, and even the Fertile Crescent of the Middle East.

Climate change will be primarily a threat to the poor in poor countries. Understanding this may make it hard to persuade the non-poor in the developed world to take the problem seriously.

Maybe I shouldn’t be explaining this.

Schelling, a 2005 Nobel laureate in economics, is an emeritus professor at the Department of Economics and School of Public Policy at the University of Maryland. He is the author of The Strategy of Conflict, among other books.

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