Climate Shock | Reflections & Notes

Gernot Wagner & Martin L. Weitzman. Climate Shock: The Economic Consequences of a Hotter Planet. Princeton University Press, 2015. (250 pages)


This week the #ClimateStrike launches all over the world. This will be good news if policies and actions begin to be deployed that will curb carbon emissions and strengthen a renewable energy sector. But changes such as these–as enormous as these–are extremely difficult, and the reason could be summed up in the word “economics.”

Capitalistic power (i.e. “money”) is a self-reinforcing cycle; the more of it you gain, the more you have to spend to protect gaining even more. This is part of the reason why the idea of a “free market” is a mythology, and why government regulations are necessary for a healthy economy. One of the most powerful regulatory levers is to ensure that the “costs” are commensurate with the “price.” In climate change terms, Is the “price” of polluting carbon commensurate with the climate change “costs?” With current subsidies and the various economic models, the answer is quite directly “no.” Pricing carbon, therefore, is an important step in mitigating climate change, an objective and calculable metric, and one that gets to the heart of human psychology. This is the great double-edged sword of climate justice. The most direct solution is the one that is anathema to our way of being. Which has led me to consider the overall phenomenon that influences the reticence in appreciating–much less accepting–climate change and the challenges ahead. Industrialized and wealthy humans are simply not used to costs. We only think of price.

Our consumerism is far removed from the human and ecological costs of bringing those products to market. We don’t see the mines, the workers, the labor practices, the carbon footprint, the chemicals, or the animals harmed in the process. We don’t even care. We only see the nice, clean, plastic wrapped good with a price tag. And we pay it. It only “cost” us $X. But the rub is that wasn’t the actual cost of the good. That was just it’s “price.”

In my recent message on The Way of Jesus and climate change, I proposed that living a “reconciled life” is a key ethic of Jesus that is directly applicable to the challenge of climate change. Understanding costs are a huge part of what I was talking about. To live a reconciled life is to reclaim what our indigenous ancestors and sages understood, that our existence is merely one element of many in our world and we should live consciously aware of how each part is integrated with every other part of the system. Our behaviors have a cost, and we ought to do everything we can to mitigate and compensate for those costs so that the cycle of life can continue well for generations to come. Most importantly, we dare not live deferring those costs to our descendants. That is a deplorable injustice, a soulless humanity. As one Native American saying goes, “We do not inherit the world from our parents, we borrow it from our children.”

And so, our industrialized advancements have created an additional self-reinforcing cycle, the distancing of the human soul from the costs of our activites on the greater world. The further away we get from the costs, the less we believe in and/or care for such costs, and we simply consume more. The only factor we care about are the benefits to self.

Climate Shock, by Wagner & Weitzman is not a great read (style-wise), but it provides the raw materials we need to be true to the numbers, and emotive to the psyche, the short and long-term costs of carbon pollution and impending climate catastrophe. They provide several examples of the costs of potential solutions as well. Most tragic is the imbalance of those who will bear the costs, both those who are reaching for solutions, and those who will suffer if those solutions are not acted upon, all in the shadow of those who deny. Hopefully, after this week, we will have the political courage to live in full knowledge of the costs of our actions, and structure our systems accordingly. The suffering or flourishing of our grandchildren’s lives are at stake.


Preface: Pop Quiz

Two quick questions:

  • Do you think climate change is an urgent problem?
  • Do you think getting the world off fossil fuels is difficult?

Chapter 1. 911

By then, it will be too late to act. We can’t re-create glaciers and polar ice caps, at least not in human timescales. The severity of the problems will have been locked in by past action, or lack thereof. Future generations will be largely powerless against their own fate. (5)

First and foremost, climate change is a risk management problem–a catastrophic risk management problem on a planetary scale, to be more precise. (6)


Climate change is unlike any other environmental problem, really unlike any other public policy problem. It’s almost uniquely global, uniquely long-term, uniquely irreversible, and uniquely uncertain–certainly unique in the combination of all four. (7)

At the very least we’ll need to add suffering to the list. The rich will adapt. The poor will suffer. (7)

Climate change is uniquely global. (8)

The global nature of global warming is also strike one against enacting sensible climate policy. (8)

Climate change is uniquely long-term. (9)

Strike two against sensible climate policy: the worst effects are far off–never mind that avoiding these predictions would entail acting now. (9)

Climate change is uniquely irreversible. (9)

These changes are long-term, and–at least in human timescales–virtually irreversible. Strike three. (10)


First, most climate models are unduly skewed toward the known, sometimes making them much too conservative. (11)

Second, even though climate models do get a lot of things right, there are fundamental things that we don’t understand about the way the climate works. (11)

That fickleness of human nature and the limits of our understanding are at the core of the climate policy dilemma. Smarts alone don’t seem to make much of a difference here. Solving the dilemma will take a completely different way of thinking. (14)



There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. Because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new. – Niccolò Machiavelli, The Prince, 1532


We’ve known what needs to be done for a long time. For one, stop subsidizing fossil fuels. (23)


“Pigouvian taxes.” Each of the 35 billion tons of carbon dioxide emitted this year causes at least about $40 worth of damages to the planet, possibly much more. The correct–the only correct–approach is to price each and every ton of carbon according to the damage it causes. (23)

That’s the policy solution in a nutshell: put an appropriate price on burning carbon that reflects its true cost to society. (24)

If–since–science has been telling us that this is such a grave problem, why hasn’t the world acted accordingly? (26)

| For one, it’s incredibly hard to overcome the huge vested interests fighting against Pigou’s and most every economist’s vision of the ideal world. (26)


This is a hellishly difficult problem to solve. And if the world doesn’t solve it, it will hit us with full force in unpleasant and unexpected ways. (28)

Everything we know about how humans behave, and how they don’t, leads us to believe that–unless political leaders muster the courage to act, decisively and soon–the world will inevitably be facing some painful choices. (29)

Chapter 2. 411


(1) Tub that holds water, and typically comes with a faucet and a drain.

(2) Overused analogy in which water is compared to carbon dioxide and other greenhouse gases; tries to make on of the more complex problems in all of science seem like a daily cleansing ritual. Still, climate scientists–and the rest of us–would be well advised to remind ourselves daily of its significance. Climate policy is about getting levels in the tub down. (30)






Year by which the greenhouse effect had been discovered: 1824.
Year by which the greenhouse effect had been shown in a lab: 1859.
Year by which the greenhouse effect had been quantified: 1896.
Year by which today’s range for the all-important “climate sensitivity” metric had been established: 1979.



Dynamic Integrated Climate Economy (DICE) (36)

That price is around $40 per ton emitted today… (37)


An economist’s way of saying “problem.” It’s when markets–left to their own devices–fail. Externalities come in two flavors: positive and negative. (37)

Climate change is the mother of all negative externalities. (37)


Geoengineering has many potential problems, but cost isn’t one of them. Welcome to the father of all negative externalities, a.k.a. the free-driver effect. (39)


Too few are going to do what is in the common interest. Everyone else free-rides. (39)


A relative concept. Very little truly is. But climate change operates on such large timescales–decades and centuries–that many of the effects might as well be irreversible. (40)


…price carbon. As the price of emitting carbon rises, carbon emissions fall. (41)




Technically, the “Montreal Protocol on Substances that Deplete the Ozone Layer.” (44)

The Montreal Protocol regulates chlorofluorocarbons (CFCs) and hydrochlorofluorocarbons (HFCs). Unfortunately, HFCs are a hundred to over 10,000 times as potent as carbon dioxide when it comes to global warming. (45)

The success of the Montreal Protocol does point to one important lesson: change is, in fact, possible. It might be more difficult with climate than with the ozone hole, but that doesn’t mean climate change is an uncontrollable, runaway problem. It requires concerted effort and unprecedented political leadership, but there’s a good reason why every prediction of where the climate is heading necessitates a disclaimer: here’s what will happen, unless society changes course. (45)

Policy could–should–guide humans to render the most devastating climate predictions wrong, precisely because society will have reacted to the most dire of warnings. (46)


A concept that’s ingrained in any economist’s DNA. Hardly ever are there true absolutes. (46)

One of the most relevant trade-offs to us here is most simply summarized as “growth versus climate.” (46)


Chapter 3. Fat Tails

We (48) know enough to act. Ignoring that reality, by now, would amount to willful blindness. (49)


One of the few rather well-established facts is that eventual global average temperatures scale linearly with percentage changes in underlying carbon dioxide concentrations. The first 1 percent increase in carbon in the atmosphere has a similar impact (49) as the 100th. (50)



…what actually concerns us isn’t necessarily how high temperatures climb. We care more about climate impacts, and how much they will cost society. (56)


The costs of climate change aren’t the result of moving away from some mythical optimal climate. (59)

To put it in more stark terms, if the global food supply suffers from climate change, boosting GDP by building more iPhones won’t do much for those who are starving. Coming up with better ways to produce food would. (64)

In this world, the higher we can expect future GDP to be, the more valuable t is to have done something about global warming pollution today. (65)

Once again, the inherent uncertainty is the biggest story. That goes for functional forms of the damage function as well as for lots of other factors. Even if we knew with certainty how emissions develop, how concentrations follow, how temperatures react, and how sea levels rise–and we don’t–we would still need to translate it all into dollars and cents. (65)

There’s always a small chance that any particular final temperature wouldn’t cause any damage. There’s also always a small chance that it would cost the world. (66)

All that begs the philosophical question: is some number better than no number at all? (67)






Climate change is beset with deep-seated uncertainties on top of deep-seated uncertainties on top of still more deep-seated uncertainties. And that’s just for going from emissions to concentrations to final temperatures. Further uncertainties prevent us from simply translating temperatures into economic damages, and none of that yet clarifies the uncertainties around the correct discount rates to calculate the optimal carbon price today. In each of these (75) steps, though, one thing is clear: because the extreme downside is so threatening, the burden of proof ought to be on those who argue that fat tails don’t matter, that possible damages are low, and that discount rates ought to be high. (76)

The question ought to be: what is the full distribution of damages and what is the chance of significant economic collapse? (76)

Some call it a “precautionary princniple”–better safe than sorry. Others call it a variant of “Pascal’s Wager”–why risk it, if the punishment is eternal damnation? We call it a “Dismal Dilemma”: while fat tails can dominate the analysis, how can we know the relevant probabilities of rare extreme scenarios that we have not previously observed and whose dynamics we understand only crudely at best? The true numbers are largely unknown and may simply be unknowable. (78)

| In the end, it’s risk management–existential risk management. (78)

With the immense longevity of atmospheric carbon dioxide, “wait and see” would amount to nothing other than willful blindness. (79)

Chapter 4. Willful Blindness

First, the defendant must subjectively believe that there is a high probability that a fact exists. Second, the defendant must take deliberate actions to avoid learning of that fact.”

Demonstrating willful blindness requires showing that the defendant must have been knowledgeable enough to realize–with high probability–that something’s happening. And then, said defendant must have taken deliberate actions to avoid acting on that knowledge. (80)

Shift from criminal defense to climate change, and from Supreme Court legalese to the colloquial interpretation of what it means to be “willfully blind.” Climate change is bad. Not acting on it makes it worse. After decades of science and years of public discussion saying as much, there’s no other way than to call those opposing–or outright denying–this reality “willfully blind.” (81)

The debate around whether to act should be over. Yes, there are some academic and also practical disagreements around what to do–whether to tax or cap carbon, how to put either into practice, or how to approximate a price on carbon using other policies like fuel-economy standards for cars or carbon pollution standards for power plants. … The ultimate goal is clear: price carbon. None of this is a secret. Dare we say that anyone who pretends otherwise is, once again, willfully blind to reality? (81)

| The question we are left with is: how high should that price on carbon be? This is where there is room for actual discussion, academic and otherwise. (81)



Opinions differ on what should rightly be called an “existential risk” or planetary-scale “catastrophe.” …it’s tough to come up with a clear order. In addition to climate change, let’s consider, in alphabetical order, asteroids, biotechnology, nanotechnology, nukes, pandemics, robots, and “strangelets.” (84)

Every entry on our list has the potential to wipe out civilization as we know it. All of the worst-case scenarios are global. All are highly impactful and mostly irreversible in human timescales. Most are highly uncertain. (84)

Chapter 5. Bailing Out the Planet

cf. Mount Pinatubo, April 2 – June 15, 1991

…over 200,000 Filipinos [displaced]. Over 300 died. (93)

| The costs were real. So were the benefits: As a direct result of the volcanic explosion, global temperatures temporarily decreased by about 0.5°C (0.9°F), wiping out the entire temperature effects of human-caused global warming up to that point. (93)


There are a few problems with that simple picture. Mount Pinatubo decreased the indirect, if all-too-real, effects of carbon dioxide in the atmosphere:… (94) … The eruption did nothing to counteract the direct effects of carbon pollution, like oceans turning more acidic after absorbing some of the added carbon dioxide. You can’t expect one volcanic eruption to solve everything. Then again, Mount Pinatubo didn’t just fail to solve problems, it created more. (95)


Climate change is a problem because too few of us consider it one. And those of us who do consider it a problem, or worse, can do little about it unless we get everyone else to act. Either we solve this problem for everyone, or we solve it for none of us. (97)

We don’t pay for the full cost of our actions. (97)

Worse, polluting is subsidized worldwide to the tune of some $500 billion dollars per year. (97)

We all collectively bear the cost of pollution, but no one faces their own global warming pollution costs of travel. As a result, we fly too much and saddle society with enormous costs: seven billion times $40, to be exact. (99)

If climate change is the mother of all externalities, as economists like to call it, geoengineering is the father of all externalities. (101)


Wearing seat belts makes some drivers feel so safe that they drive more recklessly. But that’s hardly an argument against seat belt laws. It just means we need to set (an enforce) speed limits, too. In other words: limite carbon emissions. (104)





The greenhouse effect has been a fact of science since the 1800s. The term “global warming” has been around since 1975. The basic science has been settled for decades. We have no excuse to think that using our atmosphere as a sewer for our carbon emissions isn’t un-economic, unethical, or worse. … No single person is guilty of any single climate change-related death, but collectively, we all are. (113)


Chapter 6. 007






Chapter 7. What You Can Do


The point is to do the right thing, and voting is as simple as that gets. (129)

Your civic duty isn’t just to vote, it’s to vote well. … 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. (130)

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. (130)


…if everyone does a little, we’ll achieve only a little. – David MacKay

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. (131)

Recycle. Bike to work. Eat less meat. Maybe go all the way and turn vegetarian. Teach your kids to do the same, and 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. (131)

| But do it well. Don’t just vote. Vote well. Don’t just recycle. Recycle well. (131)


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. (132)

Call it the Copehangen Theory of Change. (132)

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. (132)

…”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. (133)


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. – Richard Branson


Climate policy isn’t rocket science. It’s harder. But the solution is Bransonianly obvious: price carbon. The question is how to get there. (136)

| 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. (136)

| 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. (136)

| It’s clear that neither theory of change will apply in all situations. The world is much more complex than either (136) 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. (137)


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? (137)

| 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 (137) 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. (138)

| 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. (138)

| 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. (138)

| 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. (138) Scream poorly, and it may backfire. Scream well, and it may yet pull us over the seemingly insurmountable legislative threshold. (139)

| For crying out loud, scream well. (139)


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. (139)

| 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.” (139)

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. (139)

| 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 (139) 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. (140)

| 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. (140)

| 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. (140)

| 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 (140) 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. (141)

* * *

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. (141)

| 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. (141)

| 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 (141) 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? (142)

| 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. (142)


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 (142) 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. (143)

| 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. (143)

| 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. (143)


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, (143) 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. (144)

| 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. (144)

| 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. (144)

| 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. (144)


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” (144) 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. (145)

| 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. (145)

| 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. (145)

| 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 (145) 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. (146)

| 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.) (146)

| 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. (146)

| 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. (146) Why cede the ground of (sadly) profitable investments to those without scruples and with no desire to influence the current trajectory? (147)

| 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. (147)

Epilogue: A Different Kind of Optimism



First, we hope we are wrong in the sense that the really bad low-probability events will never come to fruition. (150)

| Second and more importantly, we hope we are wrong because society will manage to steer the climate ship away from the proverbial iceberg by severely cutting the flow of carbon into the atmosphere. (150)

Third, we hope we are wrong about the seemingly unstoppable drive toward geoengineering: shooting sulfur or other particles into the stratosphere to create an artificial sun shield. (150)


Some, like activist author Naomi Klein, call for “taxing the rich and filthy.” That’s a nice turn of phrase. (151)

Only then can we afford the luxury of talking about what would truly be an ethical solution: for carbon pollution to go the way of child labor and slavery–something to be avoided on purely moral grounds. Kick out the conomists, and call in the priests, imams, rabbis, or your favorite nondenominational philosopher. Just not quite yet. Moving to the moral high ground requires having high ground left that’s not yet inundated by rising sea levels. That, in turn, requires taking the economics seriously. (152)

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