The Opportunity Costs of Climate Change

Stephen Burns
Dr. Kleine, Advanced Persuasive Writing
December 1st, 2014
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What if your doctor told you that there is a 100% chance you will die from a terrible
disease unless you underwent a surgery which would cause you to lose your arm? Would you
do it? Most people would consider that theyd rather lose one limb than to lose their whole
body, right?
What if your doctor tells you that there is an 80% chance you will die from this terrible
disease unless you undergo the surgery? Would you do it then? How about with a 50%
chance? 25%?
This raises the basic issue of opportunity costs. Opportunity costs are all around us.
Every time you make a decision, you are balancing opportunity costs. When you buy one car
instead of another car, when you choose one partner over another, when you decide to take an
umbrella to work or just risk getting caught in the rainthese all involve the balancing of
opportunity costs.
In a fundamental sense, all economics can be reduced down to calculating opportunity
costs. An opportunity cost is the loss of a potential gain when an alternative is chosen. Every
time you make one choice, youre giving up the benefits you could have gotten if youd made a
different choice. A prudent individual weighs the benefits of two choices and picks the choice
with the lower opportunity cost. In the example of the terrible disease and the surgery above,

you are weighing the opportunity cost of losing your arm but staying alive versus keeping your
arm but taking a chance of dying.
Calculations of opportunity costs are not just a part of every individuals life; they also
exist at the national and international levels. Climate change is one such issue, and the policy
debates surrounding the issue have largely ignored consideration of opportunity costs. Those
who support policies that combat climate change, usually by regulation of the private sector, put
too little emphasis on the negative effects these policies will have on the economy. Those who
support policies that completely ignore climate change put too little emphasis on the legitimacy
of the science behind the issue. Both sides moralize about the issue, deciding that the other
sides position is incorrect and immoral, and as a result no compromise can be reached.
To be sure, climate change is a very serious issue facing the leaders of the United
States and of the international community, and if no compromise is reached then decisions will
be made in a partisan and narrow fashion, rather than in one which takes into full account the
opportunity costs which permeate every side of this issue.
Three basic questions must be addressed when debating the issue of climate change:
1. Is climate change real?
2. Is it man-made?
3. How does the cost to stop climate change compare with the cost of doing nothing?
The first two questions are essentially science questions. To answer these questions,
we as a society must turn to the scientific community, as scientists are in the best position to
observe, test, and hypothesize about natural phenomena like climate change. Anyone whos
taken any courses dealing with the philosophy of science knows that scientific knowledge is
never 100% certain and irrefutable. But the scientific community debates issues, like climate
change, until it arrives at some kind of general consensus, and we as a society must accept the
findings and conclusions of the scientific community as the best-informed opinion. A whopping
97% of scientists believe that climate change is real and that humans play at least a significant

role in contributing to climate change. To the best of the knowledge of the scientific community
(and consequently, of our society), climate change is real and is man-made.
But the third question is a bit trickier. Scientists can verify the existence of the problem
and its source. They can even describe its effects and the potential destruction it may bring.
But they cannot put a price tag on the effects or the potential destruction. Nor can they put a
price tag on the cost of implementing the policies which would be required to combat climate
change. These are questions of opportunity cost, and for that we need an economists
perspective.
Remember how opportunity costs work. Every decision we make, whether as an
individual, as a nation or as an international community, forfeits the benefits we may have gotten
from making other decisions. On the issue of climate change, there are two very basic
approaches: implement policies to stop climate change, or do nothing.
If we implement policies to stop climate change, we gain the benefits of avoiding the
potentially disastrous effects of allowing climate change to continue, but we give up the benefits
of keeping all the money we will need to divert to these policies. Such policies as the Kyoto
Protocol come at a high price, and many countriesnamely the United States, China and India
have refused the terms of the Kyoto Protocol because they would rather invest that money in
their economies and infrastructure.
If we implement policies which ignore climate change, we gain the benefits of keeping
the money we would have we would have needed to divert to policies like the Kyoto Protocol,
but we give up the benefits of avoiding the potentially disastrous effects of allowing climate
change to continue.
Think back to the doctor who tells you that you will die unless you undergo the surgery
and lose your arm. The doctor represents the scientific community, the terrible disease
represents climate change, and the surgery that causes you to lose your arm represents the
policies needed to stop climate change. And you and I are the economists who must calculate

the opportunity costs of each option and make a decision. We are being told that we have a
terrible disease (climate change) that will cause us to die (the potential effects of climate
change) unless we get this surgery (policies to stop climate change) which will cause us to lose
our arm (the monetary loss). So whats it worth to us? At what percentage of risk do we say
that its worth getting the surgery?
Since were not talking about the actual death of the world, would we even be willing to
avoid these policies to stop climate change at 100% chance of suffering the full brunt of climate
change?
Weighing the opportunity costs of an issue like climate change is very challenging. The
United Nations Intergovernmental Panel on Climate Change (IPCC) has issued annual reports
for years, predicting the effects of climate change and the probabilities of those effects
occurring. These probabilities range anywhere from near-certain to extremely unlikely, making it
very difficult for economists to make accurate predictions about the economic loss which climate
change may cause. On the other side of the equation, it is hard to predict just how such policies
as the Kyoto Protocol will effect world economies in the long run.
Even with this uncertainty in mind, a majority of economists have stated that the
opportunity cost of the policies needed to stop climate change exceed that of the opportunity
costs of the policies which simply ignore climate change. No less than the old and venerable
Dr. Ford in the University of Arkansas at Little Rock College of Business stated that, even if you
were to assume that all the predictions of the IPCC were true, it would be cheaper to let the
globe burn. However flippant Dr. Ford was being, his assessment of the opportunity costs
accurately reflects that of the majority of the economists: its simply cheaper to do nothing and
let climate change continue than to implement the policies necessary to stop climate change.
But why should we trust these economists? Dont we all know that business schools are
filled with greedy capitalist pigs, hopelessly biased to the right and obsessed with protecting
their pocketbooks and keeping taxes low? Be that as it may, the community of economists

represents the people in the best position to analyze, calculate and balance opportunity costs
on issues such as climate change. Just as scientists are in the best position to understand the
science of climate change, economists are in the best position to understand the economics of
climate change, and we as a society should accept the consensus of the community of
economists just as we should accept the consensus of the scientific community.
One particularly high opportunity cost most people on both sides of the climate change
debate never take into account is the geopolitical difficulties of enforcing any effective
international policies regarding climate change. Scientific analysis shows that if every country in
the world but China and India were able to eliminate 100% of their CO2 emissions, it wouldnt be
enough to stop climate change. Besides China and India, many third-world countries in Latin
America, Africa and South Asia have recently reached the point of economic development
where they are using fossil fuels and emitting more CO2 themselves. These countries would
find demands from western nations to be hypocritical, as the latter countries had already gotten
their full use of fossil fuels and decided to ban the use of them just when these third world
countries were getting their first chance to use them. The opportunity cost of forcing such
nations as China and India to cut their CO2 emissions in any meaningful way would likely
require starting World War III, and everyone knows the United States and its allies would not be
willing to accept such a high opportunity costeven if faced with climate catastrophe!
Most of the debate over climate change focuses on the scientific validity of the issue. A
small part of the debate looks at the economics of the issue. But I propose that we take an
interdisciplinary approach. Good economists rely on the observations and conclusions of
scientists. In this way the economics of climate change actually become a form of applied
science, and this is why scientists and economists are increasingly working together to study
the issue. It is foolish to deny the science of climate change out of a general distrust of the
scientific community. Likewise, it is foolish to deny the economics of climate change because of

a general distrust of the economic community. Both fields of study should be trusted as the
best-informed opinions in their respective fields.
The real gridlock in the debate over climate change comes not so much from the logical
split as it does over the moral absolutes which routinely get thrown around on both sides.
Environmentalists define climate change as a moral issue, wherein consideration of opportunity
costs becomes completely irrelevant and are regarded with callous. Climate change deniers
define climate change as a moral issue, considering it a massive conspiratorial deceit from the
other side and completely ignoring the consensus of scientists.
In the meantime, it never hurts to invest in innovation and technology. Recent scientific
discoveries in geoengineering have revealed extremely cheap new ways of stopping climate
change, such as by simply injecting aerosols into the atmosphere to reflect sunlight away from
the Earths surface. It may even be possible for us to avoid the higher opportunity costs of both
options.
Remember, you have a terrible disease! Deciding that youd rather die than lose your
arm is selfish, and deciding youd rather lose your arm than suffer through a serious but non-lifethreatening disease is foolish. In order for us to come together on the issue of climate change,
both sides of the debate need to drop their respective moral absolutes and adopt an
interdisciplinary approachusing the full power of both the scientific and the economist
communitiesto understand, address and resolve the problem of climate change.