A Conversation with Yale Professor and Nobel Prize Winner William Nordhaus
William D. Nordhaus – Prize Lecture. NobelPrize.org. Nobel Media AB 2019. Wed. 6 Nov 2019. https://www.nobelprize.org/prizes/economic-sciences/2018/nordhaus/lecture/
With the climate crisis looming, finding solutions to curb global carbon emissions has never been so urgent. In recent years, the concept of carbon pricing has gained traction. Countries, cities and even some universities are starting to implement carbon-pricing systems. William Nordhaus, Yale University Professor and winner of the 2018 Nobel Prize in Economics, is the godfather of the carbon price.
Nordhaus’ interest in climate change was sparked in the 1970s, at a time when domestic environmental issues, such as toxic waste disposal and water pollution, were gaining widespread media attention. He had just begun studying the concept of economic externalities, but he had “no idea” what an economist like himself could contribute to the environmental movement. That changed in 1974, when he moved to Vienna for a fellowship and shared an office with climatologist Alan Murphy. The two of them started having deep conversations about the linkages between climate change, fossil fuel extraction, and economic growth, and he would spend late nights reading deeply on the topic in his favorite library. In 1975, he published the first paper to make a connection between the economy, energy and climate change.
It wasn’t easy in the beginning, trying to harmonize environmental thinking with traditional economics. The majority of his colleagues knew nothing about carbon dioxide and its effects on global warming; it was not until the 1990s that people really started to understand these issues. So, for the first 15 years of his career, he describes how his colleagues viewed his climate change work as a “slightly strange, quixotic adventure.” Putting a price on carbon was not taken seriously, which made it difficult to publish many of his papers. But he persevered. As he states, “the acceptance rate of economic journals is the same as Yale’s – in the single digits”, and so he simply continued trying, until he eventually found a journal willing to publish the research that other economists couldn’t quite wrap their heads around yet.
A lot has changed since the 1970s – environmental economics has become a full-fledged field of study, and there is now unequivocal consensus that our changing climate is caused by unchecked economic growth. And according to Nordhaus, most economists now even embrace his beloved carbon tax. However, we talked about how the path towards a low-carbon future is long and windy. Despite dramatic decreases in renewable energy prices and the formulation of the historic Paris Agreement, Nordhaus cautions against optimism. His work reveals how the carbon intensity – or the amount of carbon dioxide emitted per unit of economic output – is actually increasing because of growth in developing countries such as India and China.
But Nordhaus doesn’t think that economic growth has to be negative. As he states: “Economic growth sounds materialistic, but what it actually means is that people don’t have to go to bed hungry, have access to a decent education, feel safe in their communities and homes. They can have vacations, and don’t need to work fourteen hours a day, for fifty-two weeks a year. Oh, and don’t forget the health improvements that have taken place in recent years. If I was born a hundred, or even fifty years ago, I wouldn’t be here talking to you: I would be dead by now.”
How can we raise standards of living through economic growth, without completely degrading the planet? Nordhaus’ answer is simple: implement a global carbon pricing system that induces producers and consumers to cut back on high carbon products and services. “That’s what we’re working towards. Many people are working for it, and many are working against it. Lots of things that need to be done, but it’s the necessary step for taking strong action on climate change.”