© MarcelC/iStock/Getty Images Plus
+Expand Caption

Climate Change: Might Present Harm Improve Policy Prospects?

Climate policy is often framed as a sacrifice for current generations—who cannot be compensated for what they give up in the present. But if climate change harms those living today, enacting policy to address it may be more likely.

A recent report from the National Climate Assessment spells bad news: “Climate change, once considered an issue for a distant future, has moved firmly into the present.” Current-day threats are typically more troubling than harms in the “distant future.” But this bad news may have a silver lining—it may improve the chances of meaningful action in the near term to reduce climate change damages.

The salience of the harm itself is one reason to think so. But a more fundamental reason is the reality of what it takes to get policies through the political system. At least in principle, if reducing the likelihood or severity of climate change provides benefits that people today are willing to pay for, they could compensate those who lose (e.g., because of higher prices for energy-intensive products or lower wages in industries tied to fossil fuels).

Future winners can’t put goods and services into a time machine as a reward for bettering their lives.

The idea that the winners could compensate the losers provides the primary underpinning for applying benefit–cost analysis to public policies: a policy should be enacted if and only if the benefits exceed the costs. In theory, the winners could cut a deal with the losers where everyone benefits—from providing more goods and services to writing checks, paid for with revenues extracted from the winners. Such compensation, of course, may not occur. The government may fail to enact a measure to compensate those negatively affected by policies to address climate change. But when a policy passes a benefit–cost test, such compensation could be possible, making everyone better off.

Why does this matter for climate policy? Presumably, a number of options—such as a carbon tax, cap-and-trade program, or less-effective substitute policies (such as renewable portfolio standards)—have benefits that exceed the costs. To the extent that those benefits are reaped by those in the distant future, those winners cannot compensate people in the present who sacrifice on their behalf by bearing the consequences of higher energy costs. Future winners can’t put goods and services into a time machine as a reward for bettering their lives.  And considering the timescale, the winners are abstractions—the benefits that they enjoy in the future cannot be reflected in the willingness of those living now to pay for policies that will favor unspecified and unimagined descendants.

This does not mean that we shouldn’t act now on behalf of those in the future. However, because compensating current generations is impossible, this entails a moral commitment to sacrifice. Convincing the public to make such a commitment is not at all easy. This, at least in part, handicaps the development of sound climate policy.

This story applies only if the benefits of dealing with climate change fall largely on abstract, distant generations. Suppose instead that those benefits are enjoyed by people living today, or by the children and grandchildren that they care about—and that taking climate action today can mitigate effects on those children and grandchildren. In this case, when climate policies pass a benefit–cost test, those who benefit are able (again, at least in principle) to compensate those who are harmed by the policies. This not only restores the ethical justification for using benefit–cost analysis in climate policy (because redistribution of the net gains could make both winners and losers better off)—it points the way toward political bargains that could make enacting policies to address climate change more likely.

Other difficulties remain. In the 2016 election, voters in Washington State turned down a ballot initiative for a proposed carbon tax that had some compensation built into it. Some climate advocacy groups opposed this proposal because the revenues from the tax were not directed toward clean energy programs. If those who prefer climate change policies to be on the books are unwilling to compensate those who do not, enacting them will and arguably should become more difficult.

A second wrinkle is that much of the benefit–cost analysis applied to climate policy considers global, not national, implications. The benefits are embodied in the concept of a social cost of carbon, which calculates the cost of climate change and thus the benefits of reducing carbon emissions on the basis of global output. If the benefits of a climate policy (such as a carbon tax based on the social cost of carbon) exceed the costs only if benefits beyond US borders are considered, the likelihood of the winners compensating the losers falls. This inability to compensate people harmed by climate change policies makes them politically more difficult to enact.

The inability to compensate people adversely harmed by climate policies makes them harder to enact.

Of course, to a degree, some climate policies will have net benefits solely from a US perspective. Those could be adopted even under legal restrictions regarding whether and when US agencies can count benefits (or costs) outside national borders. More broadly, the United States could forego requirements that policies pass a parochial, nation-based benefit–cost test as part of an international agreement recognizing that all countries should take global benefits into account when designing climate policies. US advocates of a global perspective can also try to persuade those indifferent or on the other side of ethical imperatives of action.

Persuading anyone to change their ethical standpoint regarding anything is not easy. Compensation is more attractive. Ironically because of its bad news, the recent National Climate Assessment report broadens the prospects for compensation where climate policy is concerned—if action soon is not too late to bring benefits within the next few decades. If advocates can accept the merits of compensation—and a national perspective on net benefits to make compensation more likely—perhaps the not-too-distant future will include stronger and sounder climate policies.

About the Author

image of Tim Brennan

Tim Brennan

Tim Brennan is a senior fellow at RFF and a professor of public policy and economics at the University of Maryland, Baltimore County.

Author Profile