The Economics of Climate Change
32 Pages Posted: 21 Oct 2020 Last revised: 16 Jun 2021
Date Written: October 20, 2020
This paper summarizes the economics of climate change. We first review the basics of climate science and the historical evolution of greenhouse gas emissions. We then discuss the relation between climate change and economics and assess the economic costs, direct and indirect, of climate change. These costs are uncertain and sensitive to the choice of discount rate, but overall, the expected costs are economically significant, and early mitigation efforts may be more cost-effective than later actions. We discuss the tradeoffs associated with different potential actions, such as carbon taxation and cap-and-trade programs. Finally, we examine the implications of climate change for asset pricing and investment choices.
Keywords: ESG, climate change, climate economics, social cost of carbon, sustainability
JEL Classification: G0, G12, Q5, Q54, Q55, Q56
Suggested Citation: Suggested Citation