An Eminent Economist Talks About Climate Change

In my podcast series, “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program,” I’ve had the pleasure of engaging in conversations over the past four years with a significant number of truly outstanding economists who have carried out important work in the realm of environmental, energy, and resource economics, and have been real leaders in the profession.  In my most recent podcast, we topped that, because I was joined by someone who has made important contributions not just in the realm of environmental and resource economics, but has been a global leader in the discipline of economics broadly, across numerous sub-fields, and has ventured and published well beyond economics in seemingly disparate realms, ranging from contract bridge to Italian Rennaisance painting.  All in all, he is the author or editor of 14 books and more than 300 scholarly articles. 

I am, of course, referring to my Harvard colleague – and good friend – Richard Zeckhauser, the Frank Ramsey Professor of Political Economy at the Harvard Kennedy School, and Distinguished Fellow of the American Economic Association, the Econometric Society, the American Academy of Arts and Sciences, the Association of Public Policy and Management, and the Society for Benefit-Cost Analysis.  Beyond that, I want to acknowledge that he is celebrated at Harvard and beyond as a marvelous classroom teacher, and a valued mentor to generations of students and faculty colleagues.

Near the beginning of our conversation, Richard laments a phenomenon he terms “the pumped equilibrium,” in which people hold exaggerated expectations about confronting the challenge of climate change if we do not drastically increase our efforts.  

“People started at least three decades ago saying, ‘Climate change is a terrible problem, but we can control it by cutting back on our greenhouse gases, and this is the last decade that we can do that. If we don’t do it this decade, we’re dead.’ And then, the next decade they said … the same thing. And this decade they’re saying … the same thing. And they keep telling us that we’re going to be able to [limit the global temperature increase to] two degrees centigrade above pre-industrial levels, or even more recently, 1.5 degrees centigrade above pre-industrial levels. I think that’s unrealistic.”

Richard maintains that instead a realistic assessment of the current state of climate change requires new approaches to make an impact.

“The United States has done a so-so job of cutting our emissions by about 10 percent over a number of years, but at the same time, China has increased its emissions by 13 percent, and you can expect that countries like India will be growing much faster in its emissions [levels],” he remarks. “So, I think that we should take a sober look at these problems and say, ‘What else can we do?’”

Climate adaptation, Zeckhauser states, holds the potential for greatly reducing the impacts of climate change. He cites one example in which scientists have proposed building a 100-foot-tall berm around a fjord in Greenland where warm water currently flows in and melts the ice sheets.

“This is very speculative. Will this work? I sure hope so. It’s within our realm of technological capability, but I think we should be looking for many solutions like this that could enable us to deal with … what I consider to be [the] catastrophic track that we’re on,” he says. Other potentially effective adaptation measures, he states, include increasing the alkalinity of the oceans and enforcing smarter logging policies to protect mature trees.

When I question Richard about the distributional implications of climate change, he remarks, “I think dealing with climate change and reducing its impact will automatically have very beneficial distributional consequences.  The places that are currently suffering the most from climate change are the hottest places in the world, which are both suffering under [rising] temperatures and having their weather patterns shifted. So, you would be doing God’s work in restoring or preserving the planet, and you’d be doing work that’s to the benefit of the most affected people in the world.”

He also refers in this context to the challenges posed by massive migrations of people who want to escape rising temperatures in the south by heading north.

“Those [migration patterns] are very uncomfortable for the people in both places – the people who have to do the migration, which is frequently very dangerous and expensive, the people who are still trapped in the old place because they don’t have enough resources, and the people whose areas are being affected by the new people who are coming.”

Zeckhauser says that ultimately, it is up to policymakers around the world to confront the climate change challenge.

“This is a political problem on a global scale. So, even if you didn’t want to worry about it, as a political actor, as the president of the United States has to be and our climate envoy has to be, and the UN has to be, you have to pay serious attention to it.”

My conversation with Richard Zeckhauser is the first episode of 2024 and the 57th episode over the past four years of the Environmental Insights series, with future episodes scheduled to drop each month.  You can find a transcript of our conversation at the website of the Harvard Environmental Economics Program.  Previous episodes have featured conversations with:

“Environmental Insights” is hosted on SoundCloud, and is also available on iTunesPocket CastsSpotify, and Stitcher.

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Private Sector Initiatives to Address Climate Change

Over the past decade or more, there has been increasing attention to private-sector initiatives to address climate change, with scholarly research and considerable action being centered in business schools, particularly in the United States.  This is the focus in the latest episode of my podcast series, “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program.”

I engage in conversation with Michael Toffel, Senator John Heinz Professor of Environmental Management and Professor of Business Administration at Harvard Business School (HBS).  We discuss the many ways in which business schools are giving much greater attention to climate change and other environmental issues, as well as how businesses and governments can and are working together to address climate change.  The podcast is produced by the Harvard Environmental Economics Program.  You can listen to our complete conversation here.

Toffel, who is a Faculty Fellow of the Harvard Environmental Economics Program and hosts the Climate Rising podcast at HBS, cites several examples of climate initiatives that are bubbling up organically throughout the private sector.

“What’s very interesting are …. the movement on the finance side, where you’ve got a lot deeper pockets of capital, pools of capital that are seeking out climate solutions,” he says. “You’ve got this whole ESG [Environmental, Social, and Governance] area that’s evolved … [which is] putting new screens on the types of investments that they want to include in their portfolio. You’ve got companies making these net zero commitments, which include a combination of decarbonizing their operations and their supply chains, and then using carbon credits to offset the residual. And a bunch of commitments in that regard remains to be seen.”

Michael emphasizes that it is uncertain how much this climate talk will translate into action.

“That’s long been an interest of mine – are companies following up with action? Who is? Who isn’t? And so that continues to be an interest of mine. We will see. A lot of my research in this area has taken the form of case writing, because so much of this is so new, and we don’t have years and years of data sets to do the type of empirical work that my scholarly work tends to gravitate toward.  We’re learning in real time through cases, and then doing some empirical scholarship as well.”

Toffel cites two recent projects he’s been involved with that he is especially proud of.

“On the scholarly research side, [there] is a study that’s just coming out in AEJ Applied Micro, a leading journal or field journal … that looks at the effectiveness of U.S. OSHA, the Occupational Safety and Health Administration’s efforts to target companies for inspection. OSHA is dramatically underfunded in the sense that they can maybe inspect every establishment that they regulate [once] every 100 years, and so they really need to make some tough decisions about where to go,” he says.

“Traditionally, they’ve been making these decisions for a lot of their inspections, based on where the problems have arisen in the past … and we conjecture and find some evidence that if they change that [strategy by] using more modern techniques and machine learning to figure out and predict where are problems more likely to be in the future, or where might their inspections do the most good … they can really reduce injuries by the thousands, with millions of dollars of consequences of reduced injury, pain, and suffering.”

The other research he cites is a Case Study, co-written with his HBS colleagues Shirley Lu and George Serafeim, on BMW’s approach to decarbonization.

“It’s a very engineering focused company, so they have a very engineering orientation to carbon accounting, to carbon management, to reduction, and to even their publicity around all of this. And their CEO has taken a perspective that whereas other companies are having these phase out dates for the internal combustion engine … they’ve said, ‘We’re not going to make that claim because we don’t know if we can keep that promise, in part because we don’t know if the infrastructure is going to be there to power electric vehicles, and will it be electric or will it be hydrogen powered fuel cells? We’re not really sure where the technology will shake out.’ So, they’ve been reluctant … to make such promises, because they have a culture … where they [don’t] want to … make promises until they know they can keep them.”

Reflecting on his almost two decades at Harvard Business School, Toffel remarks on how far the field of environmental management has come in recent years.

“When I applied to Ph.D. programs, this topic was very fringe,” he says. “This whole thing has completely changed, where most business schools now are leaning into the idea of environment and climate in particular … and scholarship is really exploding on these topics. So, that’s been really heartening to see. In addition, students’ interest in this has really risen incredibly in the 17 years that I’ve been here. Originally, no one talked about environment. Now … students are bringing these [issues] up. They’re demanding more content.”

For this and much, much more, I encourage you to listen to this 52nd episode of the Environmental Insights series, with future episodes scheduled to drop each month.  You can find a transcript of our conversation at the website of the Harvard Environmental Economics Program.  Previous episodes have featured conversations with:

“Environmental Insights” is hosted on SoundCloud, and is also available on iTunes, Pocket Casts, Spotify, and Stitcher.

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Vision for Energy Transition

In our podcast series, “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program,” I’ve had the pleasure of engaging in conversations over the past three years with a number of truly outstanding economists who have carried out important work in the realm of environment, energy, and resource economics, and also served in important government positions, and my most recent podcast episode is no exception, because I’m joined by James Stock, the Harold Hitchings Burbank Professor of Political Economy at Harvard, where he is also Harvard’s inaugural Vice Provost for Climate and Sustainability, and the Director of the new Salata Institute for Climate and Sustainabilty.  Also, Jim served as a Member of President Obama’s Council of Economic Advisers, where he focused on macroeconomics and energy & environmental policy.

In the podcast, we discuss the arc of Jim’s economic research, including on energy and climate change, his government service, his thoughts on the current state of climate change policy, as well as new his new role directing the Salata Institute at Harvard.  You’ll find this and much more in the latest episode of “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program,” a podcast produced by the Harvard Environmental Economics Program.  I hope you will listen to our complete conversation here.

It is striking that when talking about recent developments in U.S. climate policy, particularly over the past year, Jim Stock is really quite positive.

“The nation has made huge progress over [the course of] 2022 with the passage of the Inflation Reduction Act,” he said. “This is a huge piece of legislation. It’s really going to set the stage for driving substantial emission reductions, especially in the power sector. So that’s fantastic, [and] we all have to applaud that passage.”

Jim also commends the U.S. Congress for its bipartisan infrastructure bill which includes – among many other things – some $5 billion over five years to help states create a network of electric vehicle charging stations.  But even with such significant pieces of legislation, Stock acknowledges that the most optimistic projection for emission reductions in 2040 relative to 2005 is only about 40 percent.

“So, it’s not even a glass half-full situation,” Stock remarks. “We’ve done this huge amount of work and we’ve passed this really important legislation, but we’re only at 40 percent reduction. There is so much more work that needs to be done, and I think a big part of that work is actually figuring out what the right agenda is.”

Part of the agenda, Stock says, is determining what actions need to be taken at all levels of government and business to achieve meaningful progress. But the potential for significant progress is possible, he argues, because of the tremendous technological advancements in recent years.   Interestingly, Jim Stock thus explains the reliance in the Inflation Reduction Act on “carrots” (subsidies), as opposed to “sticks,” not just on the basis of political feasibility, but also on the reality of technological change.

“If you think back to 2005 … there really weren’t good alternatives to coal and natural gas in the power sector, and electric vehicles were ridiculously expensive, and we just didn’t have the technology.  Today everything is totally different, where we are looking at technologies, whether they’re light duty vehicles or solar or wind, and now increasingly batteries, even grid storage batteries, are really becoming at a much better cost point and are actually beating out their fossil fuel alternatives. So now the question is, what can we do to spur that?  At this point, subsidies can be very effective.”

I also ask Jim about his recent appointment as director of the Salata Institute, and he responds by noting that it reflects Harvard’s commitment to pursue pragmatic solutions to the climate problem and communicate them to policymakers and the general public.

“The mission of the Institute is to harness the strengths and abilities and powers of Harvard University and its scholars and students to press forward viable solutions and practical solutions in an impactful way in the real world,” he says, emphasizing that the challenge reaches across multiple disciplines. “It spans economics. It spans the sciences. It spans health and spans business, and so you need to have expertise drawing from across the different parts of the university and different fields to really be able to make progress.”

For this and much, much more, I encourage you to listen to this 45th episode of the Environmental Insights series, with future episodes scheduled to drop each month.  You can find a transcript of our conversation at the website of the Harvard Environmental Economics Program.  Previous episodes have featured conversations with:

“Environmental Insights” is hosted on SoundCloud, and is also available on iTunes, Pocket Casts, Spotify, and Stitcher.

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