(homydesign via Shutterstock/Salon)

The planet won't notice you recycle, and your vote doesn't count

But you should do it anyway. The definitive guide to screaming at, coping with, and profiting from climate change


Gernot WagnerMartin L. Weitzman
March 29, 2015 4:00PM (UTC)
Excerpted from "Climate Shock: The Economic Consequences of a Hotter Planet"

Your vote doesn’t count.

Put a group of economists in a room to debate the wisdom and virtue of individual action, and soon they’ll be debating the value of casting one’s vote: zero—in some strict, narrow, “economic” sense of the world.

It’s a tough pill to swallow and runs counter to every call for civic duty, but we don’t say this lightly. The chance of your one vote making the ultimate difference is so small we might as well call it zero. Some of the best research on this topic—by a team including Nate Silver of baseball statistics and, more recently, of FiveThirtyEight electoral prediction fame—put the probability of your vote making a difference in a U.S. presidential election at 1 in 60 million. And that figure includes the 2000 George W. Bush–Al Gore match-up in Florida. These are steep odds, to put it mildly. Even if your candidate were able to boost U.S. gross domestic product by ¼ percent in a given year, and we assume a very close election, your personal benefit of casting the decisive vote would still only be a tiny fraction of a penny. In other words: zero.

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We can’t leave things there. It would be both rather depressing and also rather narrow-minded. Maybe statistics and economics alone aren’t the right tools with which to analyze one’s personal action. Ethics, for one, plays an important role.

WHY VOTE

Self-declared “rational” economists may continue to shake their heads in private and joke about how voting is one of these unexplained mysteries. It’s not a mystery for the rest of us. We all know that voting is the right thing to do. Our military men and women pay with their lives for us to be able to cast that vote. It’s a sacred right. It’s the epitome of democracy. Not voting shows contempt for American— for human—values. We shouldn’t just vote. We should rock the vote. Or at least we should display a prominent sticker declaring that we have voted, thereby coaxing others into doing so.

Your personal monetary gain may be zero, but that’s beside the point. The point is to do the right thing, and voting is as simple as that gets. It doesn’t require you to take your family to a soup kitchen on Christmas morning to volunteer. You don’t need to pay extra to do it (ever since poll taxes were outlawed). Some employers even give you the day off. And you can express your opinion without having to do so publicly. You don’t have to tell anyone whom you voted for, as long as you do vote. Civic duty fulfilled.

Academics have a way of complicating things quite a bit. Here’s a shortened version of what Jason Brennan describes as “the folk theory of voting ethics”:

1. Each citizen has a civic duty to vote.

2. Any good faith vote is morally acceptable. At the very least, it is better to vote than to abstain.

3. It is inherently wrong to buy or sell one’s vote.

Brennan then spends 200 pages destroying that folk theorem and arrives at a more complex ethical justification for voting. He could even live with people buying and selling their vote, but any old vote won’t do. If you don’t vote for the common good over your own narrow self-interest, don’t vote at all.

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In other words: Your civic duty isn’t just to vote, it’s to vote well. It’s a tough argument with which to disagree. Vote for a cause larger than yourself. Vote for those who promise more than just to further their own agenda (or yours!). Vote for those who seek to look out for society at large.

Whatever that may mean in a specific case, it clearly goes beyond the not-sure-I-should-vote-I’d-rather-watch-TV reasoning. Get up and vote; it’s the right thing to do. And don’t just vote for the sake of voting. Vote as an informed citizen. Vote well.

That means thinking through the questions we’re asking in this book, and then seriously asking yourself whether to vote for candidates who will act on climate change.

WHY RECYCLE, BIKE, AND EAT LESS MEAT

Shift gears to reducing, reusing, and recycling, the mantra of every good environmentalist. The thinking there is roughly the same as for voting. Your single act of kindness isn’t going to change the course of history. Recycling won’t stop global warming. One of us wrote an entire book titled: But Will the Planet Notice?

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No, it won’t.

The math is about as clear as can be, all without having to go through Nate Silver–type reasoning to guess how likely it is that your vote could decide a U.S. presidential election. Reducing your own carbon footprint to zero is a noble gesture, but it’s less than a drop in the bucket. Quite literally: the standard U.S. bucket holds about 300,000 drops; but you are one in over 300,000,000 as an American, and you are one in seven billion as a human being.

Every little bit doesn’t always help. In the words of David MacKay analyzing the implications for the wider energy system, “if everyone does a little, we’ll achieve only a little.” So why go green at all? Because it’s the right thing to do. It’s also how we learn the values that we have to apply on a much larger scale to tackle climate change.

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Recycle. Bike to work. Eat less meat. Maybe go all the way and turn vegetarian. Teach your kids to do the same, and to turn off the water while brushing their teeth. It’s good for you. It’s good for those around you. It’s the right thing to do.

But do it well. Don’t just vote. Vote well. Don’t just recycle. Recycle well.

RECYCLE WELL

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If individual, inherently moral acts of environmental stewardship—like recycling—lead to better policies, sign us up. The goal, in the end, is to enact the best overall policies that will guide market forces in the right direction. So if asking one more person to recycle more is the foot in the door for their going to the polls and voting for the right policies that are in the common interest, great. Ask people to “go green” in some small way like bringing a canvas bag to the store, and they may feel a greater moral obligation to do something about larger environmental issues. Psychologists call it “self-perception theory”: see yourself as greener, vote greener.

Cue the virtuous circle of civic engagement, informed behavioral change, and all-around good things for a better planet: Voting well leads to better policies, which allow for a more enlightened citizenry; a more enlightened citizenry, in turn, leads to more people voting well. Recycling well leads to better environmental policies, which allow for a more environmentally enlightened citizenry; a more environmentally enlightened citizenry, in turn, leads to more people recycling well.

Call it the Copenhagen Theory of Change. Danes didn’t wake up one day and decide to bike to work en masse through the bitter cold of northern Europe. Nor did Copenhagen’s Lord Mayor wake up one day and decide to install a sufficient number of bike paths to get his residents out of their cars and onto bikes. Cars had dominated Copenhagen much like most other European cities for decades. It took the fuel crisis of the 1970s, increased environmentalism, and years of activism to go from “car-free Sundays” to over 50 percent of Copenhageners commuting by bike every day.

And biking isn’t unique. The Voting Rights Act wasn’t passed overnight. It took years of all sorts of action—from the early sit-ins to the Selma marches. The U.S. environmental movement, which sparked the “environmental decade” of the 1970s, followed a similar path. Years of self-reinforcing activism eventually led to the necessary legislative changes, and the debate didn’t end there.

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Time is the all-important factor. We once had decades to turn the climate ship around. Not anymore. That makes it all the more important to get our theory of change right. It’s also where we return to our recurring theme of tradeoffs, this time as it pertains to recycling well.

Economists deem the existence of trade-offs to be self-evident common sense. Psychologists add another twist to it, turning the effects of “see yourself as greener, vote greener” on its head. Call it the “crowding-out bias.” The threat of climate change motivates people to act—but only up to a point. In the extreme version of this effect, the “single-action bias,” people may do only one thing, like recycle, or put a solar panel on their roof, or buy a “green” product. This doesn’t necessarily mean that anyone, in fact, believes that one step is indeed enough to stop climate change, but that one step may be enough to assuage their worries and lead them to move on. Yes, the climate is changing, but women are still dying in childbirth. There are other problems to worry about, too, and now I’ve done my part for climate change.

Economists are instinctively more comfortable with this crowding-out bias view of the world than the one supporting the self-perception theory, a.k.a. the Copenhagen Theory of Change. After all, trade-offs often lead people to substitute one action for another. That’s particularly troubling when people substitute single, individual actions—like recycling—for larger policy actions—like voting. This phenomenon has been surprisingly poorly studied so far.

We know quite a bit about the mechanisms from collective action back down to individual ones. Setting the right incentives—paying people to do certain things— sometimes crowds out virtuous behavior. Pay people to donate blood, and watch blood donations go down, at least among women. Men seem to have no qualms about being paid for their donations, and women, too, increase their donations once again when the money is given to charity rather than paid out to them.

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We also know a bit about substitution among individual actions. Ask people to voluntarily pay more for “green electricity” and watch some increase their electricity consumption as a result.

Both of these mechanisms support the crowding-out bias view of the world, where one green deed doesn’t necessarily beget another but may indeed be a hindrance in light of trade-offs in people’s everyday behavior. However, we know little about whether the crowding-out bias does, in fact, extend from individual to collective action.

No one wants the crowding-out bias to dominate. It’s something to avoid and overcome. If you catch yourself recycling that paper cup and thinking you’ve solved global warming for the day, think again. If you catch yourself buying those voluntary carbon offsets for the cross-country flight, feeling better about flying, and as a result doing more of it, that’s not quite in the spirit of the exercise either. “The hotel changes my towels only when I throw them on the floor and the airline lets me spend $20 extra to offset my carbon pollution? Eco-vacation, here I come!”

None of that is all that far-fetched, even for the most committed of environmentalists. You can’t do it all. Plenty of environmentalists who recycle, refuse meat, don’t drive, and generally try to do it all the green way still commit various other, often more significant carbon sins. Flying is a prime example.

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THE SKY IS THE LIMIT

Even the most committed canvas-bag-carrying, reusable water-bottle-sipping environmentalists often draw a line with flying. You can and should take the train from New York to Washington, D.C., but Miami to Seattle is another matter, and Atlanta to Beijing is impossible. Such is the lot of the transcontinental environmentalist: talks to give; meetings to hold; melting glaciers to see firsthand. Video conferences may work in lieu of boarding yet another flight, but sometimes you simply can’t phone it in. Diplomacy, as we all know, happens over after-dinner drinks.

Not going on that business trip won’t do. It’s the classic example of the not-so-invisible hand of the market at work. If you generously volunteer not to board the flight in order to cut down your carbon footprint, the planet won’t notice your sacrifice. Your competitor will.

You can always pay someone to plant a tree or capture the methane from a manure pit on your behalf to offset the pollution your flight causes, and you should. We clearly should be planting more trees and covering more manure pits. But none of that amounts to the type of change that’s truly needed. That kind of change can happen only on the policy level.

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We can look to the European Union for some of the answers. Its emissions trading system has been covering domestic flights since January 2012. Passengers on the typical flight within the EU pay for part of the carbon pollution they cause. Current prices average out to about $2 per ton of carbon dioxide. That’s not nearly enough to cover the true pollution costs of each flight, compared to the $40 or more necessary to capture the full costs. But it’s a significant start and a crucial step up from voluntary action. Passengers who pay these small amounts can now take their trips with an ever-so-slightly clearer conscience. Instead of reaping all the benefits of showing up for that client meeting while seven billion others pay for the cost of pollution, everyone will begin to pay for their own pollution costs and will thus be moved to change their actions. The goal, of course, should be to broaden and deepen the system: incorporate the full pollution costs, and not just for intra-European flights.

That’s where the International Civil Aviation Organization ought to come in and get serious about instituting a truly global approach to aviation emissions. The level of ambition for such a global approach is all-important, though the principle is clear. Sir Richard Branson got it exactly right: “I think a global carbon tax is screaming— blindingly obvious and should have been introduced 15 years ago, and that would have been completely fair. Every single airline in the world would have been treated in the same way, every single shipping company. . . . [A]s an airline owner, I’m sure I’ll get told off when I get home . . . but there should be a fair global tax with everybody taking a little bit of pain. It’s not massive. And if that happened, we would get on top of the problem.”

Amen.

Climate policy isn’t rocket science. It’s harder. But the solution is Bransonianly obvious: price carbon. The question is how to get there.

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If “self-perception theory”—the Copenhagen Theory of Change—wins the day, every little bit builds toward the next and eventually leads to half of Copenhageners biking to work and strong national policies to guide the masses toward a low-carbon, high-efficiency world. In that case, recycling, reusing, and buying voluntary carbon offsets may well lead to real change, quickly.

If crowding-out bias wins the day, many too-direct appeals to our better nature may be counterproductive. That may be particularly true for those in the middle of the political spectrum who will ultimately be deciding overall policy. It’s easy to convince environmentalists to recycle more, but they will already be voting for strong climate policy no matter what. It’s the ones in the middle who need to be convinced.

It’s clear that neither theory of change will apply in all situations. The world is much more complex than either simple mechanism would suggest. One thing is clear: Fight crowding-out bias at all cost. And if you have to make a choice between recycling and voting for a price on carbon, choose voting.

STEP #1: SCREAM

What are the things you can do? For one, don’t trust any list that gives you ten things you can do to stop global warming. You can’t stop it yourself. If biking to work and turning down the air conditioning might inspire your friends and coworkers and so help build a movement, great. But those actions alone won’t heal the atmosphere. Recall the drop-in-the-bucket analogy. There’s a fine line between simplistic single actions and doing what counts. You can’t stop global warming, but what if a big box retailer announces it will green its supply chain to remove 20 million tons of carbon dioxide pollution by 2015? What if a major airline used voluntary carbon offsets not just as a marketing tool but to evoke real change, perhaps even because it would benefit directly from a global carbon pricing system as its fleet is younger and more efficient, and hence pollutes less than the competition? What if the decision is about building a pipeline to transport particularly dirty tar sands oil from Canada to refineries in the Gulf of Mexico?

The simple answer is that laggards can’t be choosers. If greening your supply chain isn’t just good for the planet but also good for business, green it. It’s a win-win. The same goes for building a new pipeline—or rather not building one. If an honest benefit-cost calculation shows it’s not worth the price the planet will have to pay, the decision is clear. But once again, it’s the next step that likely matters more: If the first step leads to more momentum and more action down the line, take it. If it stops us from doing more, stop and think. Trade-offs matter. They matter for individual action. They also matter for policy.

In the end, a democratically elected government does —up to a point, over time—do as its citizens want. That’s where activists enter. If getting arrested in front of the White House makes it clearer to the president that we want action, it may well prompt that action. Civil Rights had Malcolm X and Martin Luther King and Rosa Parks, each pursuing their own strategy. Some may have decided against one or another action because they figured it could backfire or not amount to enough. But eventually all could take credit when President Lyndon B. Johnson signed the Civil Rights Act of 1964. And activism—and the need for it—didn’t end there.

So: Scream, protest, debate, negotiate, cajole, tweet, use all the means at your disposal to call for the scale of policy change needed to match the magnitude of the climate challenge. To use the economists’ logic of comparative advantage, do what you do best: Teachers, teach; students, study; community leaders, lead. Meanwhile, avoid crowding-out bias at every step and make sure to keep the next step in mind: the Copenhagen Theory of Change in action.

That’s step #1. And it applies at every level—from city halls to state capitols to Washington, D.C., to capitals around the world, and to every level of the United Nations edifice. There are better and worse ways of screaming, but we won’t pretend to know more than coteries of political strategists, focus-pollsters, and other hired guns. Scream poorly, and it may backfire. Scream well, and it may yet pull us over the seemingly insurmountable legislative threshold.

For crying out loud, scream well.

STEP #2: COPE

Elisabeth Kübler-Ross gave us the five stages of grief. We are long past the time when denial, anger, bargaining, or depression is appropriate. The globe has already warmed by 0.8°C (1.4°F). Extreme weather looks to be the new normal. New York City was hit by two “100-year” storms within two years. The costs are piling up. The appropriate response: acceptance.

To be clear, we ought to do everything in our power to prevent further climatic changes. It’s not a question of if we should set a price on carbon but how high it should be. It’s clear that the optimal price is so high relative to where we are globally, that right now there’s only one way to go: up. Increase the price on carbon. All that falls under: “Scream.”

Coping with climate change comes with one all-important feature. Unlike doing something to prevent further climate change in the first place, coping is all about you. You buy an air-conditioner; you feel cooler—even though the planet warms ever so slightly as a result. That alone doesn’t mean it’s not the right thing to do for you individually, but there are better and worse ways to cope.

If you are committing to a thirty-year mortgage, think twice about that beachfront property. Any bank with sensible mortgage checks and balances may take one look at elevation maps and decide not to give you the loan in the first place. But don’t trust that decision-making process. It’s you who’s left with the property after thirty years when sea levels have risen further, not the bank.

A better test may be where insurance premiums for climate-related risks are going. In most instances, they have nowhere to go but up. Lloyd’s of London, Munich Re, and Swiss Re, the insurers of last resort who are left holding the ultimate risk, have been warning about climate risks for years. In the end, insurers and re-insurers will be OK. They’ll charge higher premiums or stop selling particular policies altogether and manage to keep their profit margins intact.

As long as higher insurance premiums signal that you shouldn’t be rebuilding in a flood zone, that’s just as well. But often it’s the public left footing the bill, sometimes directly. Part of the tens of billions of dollars in federal Sandy aid have gone to rebuilding properties just as they were before Hurricane Sandy swept them away. That’s a federally subsidized disaster in the making. Much better to go with New York governor Andrew Cuomo’s suggestion and use part of that money to buy private properties and convert them into public lands. The next big storm will inevitably require additional emergency aid to help those hit the hardest. Every aid disbursement inevitably also creates unintended consequences of subsidizing people living in flood zones. Governments can’t abdicate their responsibility to help those worst hit, but they clearly ought to stop fueling this vicious circle.

While we shouldn’t be giving aid to homeowners to rebuild their flooded homes on remote barrier islands, some adaptive actions in the face of rising seas may well be warranted. It’s not a secret that eventually, we’ll need to move much of New York City to higher grounds—unless, or possibly even if, we “scream” loudly enough. It’s also no secret that in the meantime, putting up higher seawalls may be the best option and well worth the cost. The Dutch figured this out a long time ago. Their seawalls are necessary simply because large parts of the Netherlands are already below sea level, entirely without climate change. New York is now facing similar questions around building flood gates to prevent storm surges and worse from engulfing the city. What used to be a 1 percent chance of storm tides breaching typical New York seawalls in the mid-1800s has since risen to 20 to 25 percent per year. Manhattan is home to hundreds of billions of dollars’ worth of real estate, all concentrated in a relatively small area. A seawall to prevent the worst may be comparatively cheap. That’s what the Dutch do on a much broader scale.

* * *

Coping is all about planning ahead. If you have a Dutch friend living behind a dam, tell her to Plan voor het ergste. Plan for the worst. You buy insurance not in the hope of something going wrong, but to insure yourself in case it does. The overwhelming majority of fire insurance policies never pay any money. That’s exactly how the insurance company can afford to sell you a policy in the first place.

No one knows whether the next 100-year flood will hit New York City next year or next decade. (We are pretty sure by now that it will be before next century.) All we know is that we can’t get complacent. That same logic also goes for the longer run.

Patek Philippe is famous for its ad campaigns featuring a proud parent with his or her child. The fourth-generation family-owned watch company would like you to start your own family tradition, ideally by going out and buying one of their watches to then bestow onto your progeny’s wrist. Some New York real estate companies have started to pick up on that with slogans like: “Own for generations.” Whether or not that’s actually possible may depend on how many generations you are thinking ahead. If your horizon ends with your grandkids, chances are you’ll be fine. But it won’t take all that many generations for some of these property owners in lower Manhattan to face the same choice some more remotely located New Yorkers (like those in Breezy Points, Queens) face now: rebuild after the flood, or just move to higher ground?

Whatever you do, hold on to that Canadian or Swedish or Russian citizenship. You and your grandkids may still want to vacation further south, but massive changes are upon us.

STEP #3: PROFIT

Imagine the 700 ppm Fund. That number is far from set in stone, but it’s the International Energy Agency’s (IEA) best guess for where we are heading by 2100. IEA takes into account all countries’ stated emissions reductions targets and then some. This already optimistic scenario would imply a 50 percent chance of global average warming of over 3.4°C (6.1°F) above preindustrial temperatures and about a 10 percent chance of eventual global warming exceeding 6°C (11°F). Think back to chapter 1: Mark Lynas’s reference to Dante’s Sixth Circle of Hell, or HELIX, the European Union research project detailing the impacts. Both Lynas and HELIX end their nightmare scenarios at 6°C (11°F). We are looking at a 1-in-10 chance of going there or beyond. It’s tough not to sound overly dramatic about what that world would look like. Sea levels were up to 20 meters (66 feet) higher last time concentrations hit 400 ppm. A 700 ppm planet would look very different from anything we can imagine today. Still, that’s our current trajectory.

You have $1 billion under management to invest in such a world. One way to profit is to invest in restoring the value of damaged assets: Someone has to be pumping away flood waters and rebuilding homes. The flipside of the cost of coping with climate change: ka-ching! Enormous costs imply large profit opportunities.

One crucial issue is the time scale involved. Many of the effects are decades out, though plenty are not. Extreme storms, droughts, and floods are already hitting home. Buy food staples, fresh water, or any kind of commodity that will be scarcer and, thus, dearer in a much warmer and more unstable world. To make a buck off the general trend, buy all of these assets while there are still plenty of climate skeptics around, who are betting against the general trend, to ensure you get in before prices really take off. And, since we are imagining investment opportunities in a world heading toward 700 ppm, buy stakes in mining and oil companies savvy enough to drill in the newly ice-free Arctic.

***

Now imagine the 350 ppm Fund. We have long passed that threshold. Right now we are at 400 ppm for carbon dioxide alone. And the atmospheric tub is still filling at an increasing rate. Returning to 350 ppm would require an immediate about-face and then some. Everything we know about the economics tells us that this won’t and can’t happen. “Simply” turning off all smokestacks—an enormous, immediate, and global deindustrialization—will no longer do. If anything, it would require an enormous reindustrialization to transform energy and transport sectors and start capturing carbon directly from the air.

Lots of infrastructure will still be at risk for many years to come. We will have locked in decades, even centuries, of sea-level rise and plenty of unknown unknowns. It may already be too late for the West Antarctic ice sheet, but the world may steer clear from other tipping points with even costlier effects.

Stranded assets dominate the picture. Bill McKibben popularized the concept in Rolling Stone. The Capital Institute did the math for him: Just to stabilize atmospheric carbon dioxide concentrations at 450 ppm, about $20 trillion dollars’ worth of carbon still underground will likely have to remain there or be pumped out only while pumping the resulting carbon dioxide back in, devaluing fossil fuel companies in the process.

In this world, your $1 billion may be best served betting against coal, oil, and gas. They are bound to perform worse than the broader market. Wind, solar, and all sorts of low carbon technologies win. Carbon air capture technologies may be another big winner, assuming that the carbon dioxide price we all pay will be appropriately large. Once again, timing is everything. In order to make a buck, it will be key to get in at just the right time.

***

The truth ought to be somewhere in the middle, between the business-as-usual nightmare of the 700 ppm and the green dream of the 350 ppm worlds. Just to be clear, there’s an important difference between these two numbers: 700 ppm is where we are heading. Calling for “350 ppm” is a statement about where we wish to be heading. The two are in entirely different categories. There is hope that if we scream loudly enough and scream well, the world could maneuver away from the precipice of the 700 ppm future and toward an outcome closer to 350 ppm, but that’s far from a certainty.

So, what to do with your hypothetical $1 billion? First you need to realize that smart investment decisions are all about what is (or, rather, what will be), not what ought to be. The current Arctic gold rush is an all-too clear example of that. Those not holding their noses and, thus, not participating in the bonanza of newly opened shipping lanes, mines, and oil fields may well be losing out.

That said, some recent evidence suggests that the more socially conscious of enterprises may, in fact, be outperforming the market, sometimes quite significantly. But our advice isn’t about the fact that seeing things through green-tinged glasses could help identify opportunities that the market misses. Instead, we’ll focus on the fact that smart investment decisions are all about managing risk. There’s a distinction between risks to the planet and risks to Big Coal, Oil, and Gas, but there’s also an important link: Regulations and policies for the most part point in only one direction.

Few doubt that, given trends in the regulatory climate, the arrow for tobacco stocks points downward. In Australia, tobacco companies are required to sell their products in plain packaging, with graphic health warnings. The 2011 Tobacco Plain Packaging Act was met with fierce resistance by a handful of tobacco companies, who stood to lose a lot and argued in court that the act was unconstitutional. The day the Australian High Court rejected these arguments and upheld the law in August 2012, British American Tobacco and Imperial Tobacco share prices each dropped by about 2 percent. The High Court decision could have gone the other way, possibly lifting stock prices, but it’s highly unlikely that governments will suddenly decide that tobacco has been vilified for too long and start removing packaging restrictions and smoking bans. If anything, more cities will follow Mayor Michael Bloomberg’s New York and banish smokers onto the sidewalks, or worse. Investors concerned about managing risks ought to take note.

Something similar goes for anyone wanting to invest in Big Coal or Oil. Regulation, for the most part, will only push coal or oil company valuations down, not up. They are the ones with the stranded assets once we have a sensible price on carbon dioxide. It’s highly unlikely that governments will suddenly start taxing wind and solar companies and increase subsidies for fossil fuels even further. (Big Gas may be in the gray zone: Initial regulations may price coal-powered generation out of the electricity system once and for all, making natural gas the fuel of the moment—at least until it, too, runs up against ever tightening greenhouse gas limits. It may be a “bridge” to a low carbon future, but that doesn’t mean it wouldn’t justify eventual heavy tolls in its own right.)

In short: Divest, because it’s the prudent, less risky financial decision. It helps you hedge against downside regulatory risks and stranded assets. The move from the 700 ppm path toward a 350 ppm one will come in political fits and starts. Not investing in fossil fuel stocks is not just the ethical choice, it may well be the profitable one.

All that said, all-out divestment from fossil fuel stocks may not be the only ethical choice. Better yet: Apply that socially conscious screen to what you do with the returns. Why cede the ground of (sadly) profitable investments to those without scruples and with no desire to influence the current trajectory?

It’s clear that all of us—at least the billion or so high-emitters on this planet, including most anyone reading (or writing) this book—have been profiting from a world heading toward warmer climates all along. That doesn’t make it right, but there’s indeed an ethical path forward: Now that the reality of heading toward 700 ppm and the mandate of bending the path toward 350 ppm have become abundantly clear, take your outsized returns and make your money work even harder by helping scream for the biggest policy push your newly found wealth can muster.

Excerpted from "Climate Shock: The Economic Consequences of a Hotter Planet" by Gernot Wagner and Martin L. Weitzman. Copyright © 2015 by Princeton University Press. Reprinted by permission.


Gernot Wagner

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Martin L. Weitzman

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