💾 Archived View for gmi.noulin.net › mobileNews › 4433.gmi captured on 2023-01-29 at 06:06:03. Gemini links have been rewritten to link to archived content
⬅️ Previous capture (2021-12-03)
-=-=-=-=-=-=-
2012-12-11 11:51:58
The costs of climate change can be mitigated if economic activity moves in
response
Dec 8th 2012 | from the print edition
WHEN Superstorm Sandy roared ashore in late October and the lights of lower
Manhattan went out, New Yorkers were given a stark vision of a possible future.
Climate-change science is still a realm of great uncertainty but there is
consensus that the planet is warming dangerously and that people are to blame.
A recent report commissioned by the World Bank warned that the world is on
track to have a global mean temperature that is 4 C above pre-industrial levels
by 2100. If so, sea levels could rise by between half a metre and a metre by
the end of the century, threatening hundreds of millions of people in coastal
cities. Other regions would face the threats of droughts, bigger storms and
changing rainfall patterns. That entails not just human costs but economic
ones, too.
The question that preoccupies Klaus Desmet of the Universidad Carlos III in
Madrid and Esteban Rossi-Hansberg of Princeton University in a new NBER working
paper* is whether there are ways to manage the impact of changing weather
patterns by moving the location of economic activity. They note that roughly
90% of global production uses just 10% of available land. If that 10% is
threatened, activity may at least theoretically shift to bits of the 90% made
more hospitable by climate change.
Messrs Desmet and Rossi-Hansberg build a model economy, and then batter it with
different temperature increases to see how it reacts. In their benchmark
analysis, they allow people to move around as they like in response to these
changes. In extreme scenarios freedom of movement doesn t make much difference:
temperatures reduce global agricultural productivity to near zero, implying
the end of human life on Earth . But in more moderate scenarios, rising global
temperatures improve agricultural productivity in northerly climes. Welfare
losses are small because there are big movements of people northward. A
relatively small temperature increase (by the model s standards), of 2 C at the
Equator rising to 6 C at the North Pole, causes a shift in the average
locations of agricultural and manufacturing activity of about ten degrees of
latitude by the end of this century roughly the distance between Dallas and
Chicago, or Frankfurt and Oslo.
Restrictions on movement dramatically increase welfare costs, however. The
authors modify the model by introducing a rigid border at the 45th parallel,
which runs through the northern United States and across southern Europe, with
roughly 1 billion people living above the line and 6 billion below. The model
finds that rising temperatures actually benefit the northern section of the
globe. Agricultural productivity grows and northern manufacturers enjoy more
trade with the throngs that mass just south of the border. Welfare in the south
falls, by contrast, by about 5% on average relative to the no-warming case. The
model is simplistic, of course, but it suggests that limits on migration have a
big effect on the costs of global warming.
Unfettered migration is obviously a lot more likely within countries. But even
then, wouldn t it matter if people left a really productive place for somewhere
less dynamic? Real output per person in the New York area is some 70% higher
than in Buffalo, for instance; a New Yorker fleeing upstate may suffer a large
income loss. Matthew Kahn of the University of California, Los Angeles, reckons
that this, too, is manageable. In his book Climatopolis , Mr Kahn points out
that the productivity of rich places often has little to do with unique
geographical advantages. Instead, cities profit as magnets for skilled workers
attracted by other skilled workers. New York s financial wealth stems not from
its port but from its brimming community of firms and workers.
Mr Kahn argues that as the climate warms, vulnerable areas like lower Manhattan
will become less desirable relative to rival centres: midtown Manhattan, New
York s suburbs, or Chicago. Rational workers and firms should assess the risk
of floods or the like and migrate, raising the productivity of the destination
locations as they arrive. The move wouldn t be costless. Investors in lower
Manhattan property would suffer large losses, for example. Yet Mr Kahn says
there could also be gains, as activity shifts from cities with an out-of-date
capital stock (like New York s ageing infrastructure) to more modern areas. The
speed of climate change may also help, reckons Paul Romer of New York
University, if broader shifts in habitability occur slowly enough to allow a
relatively smooth geographic adjustment. But change may be too quick and
unpredictable to allow for easy adaptation.
Over to the policymakers
Governments may hinder the process of adjustment. Subsidies like
government-provided flood insurance to those in vulnerable areas may mute price
signals that would otherwise encourage people to leave threatened places before
they have no choice. Climate-safe cities, if any exist, might limit their own
development when confronted by flows of migrants from vulnerable areas. That,
in turn, could deflect migrants, who might wind up not at the next best
alternative to lower Manhattan but the tenth-best option. If those who stand to
gain from warming use government to protect their interests, the costs of
climate change could soar.
Policymakers can also help. Messrs Desmet and Rossi-Hansberg reckon that a
carbon tax would raise the relative incomes of innovative cities that rely more
on ideas than natural resources for production, encouraging people to migrate
toward more productive places. Mr Kahn also worries about market failures.
Areas that lose value as they become riskier may become magnets for poor
families seeking affordable housing. That may set the stage for humanitarian
disaster. Climate change demands a lot of governments that have done little to
justify confidence.
Sources
"Turn down the heat: Why a 4 degree Celsius warmer world must be avoided",
World Bank report, November 2012
"On the spatial impact of global warming", by Klaus Desmet and Esteban
Rossi-Hansberg, NBER Working paper #18546, November 2012
"Climatopolis", by Matthew Kahn, Basic Books, September 2010
http://www.Economist.com/blogs/freeexchange
from the print edition | Finance and economics