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William Watson: On climate change, adaptation has a big advantage

Financial Post logo Financial Post 2021-07-30 William Watson
graffiti on a wall: Greenpeace activists paint a slogan reading © Provided by Financial Post Greenpeace activists paint a slogan reading

You hear talk about how the Conservatives could win the next federal election if they dumped their current leader and brought back Stephen Harper, who reportedly is tanned, rested and ready, as was said of Richard Nixon in the mid-1960s. I always liked Harper but I’m an economist so his dour, economist ways appealed to me. When I didn’t like him was when he stopped acting like an economist and gave in to populist tendencies, like giving tax breaks for kids’ soccer.

One very good thing about Harper was his strategic understanding that on climate policy this country should not get too far out ahead of its main trading partner, the U.S. If we price carbon and they mainly don’t — which, as Jack Mintz pointed out in FP Comment yesterday, is a good description of our current reality — that could cause us considerable economic difficulty. Mind you, with our flexible exchange rate, the damage would be limited. If we priced our goods and services out of the U.S. market by taxing their emissions content, the loonie would fall and, to an extent, we would get back in — though with a currency that bought us less.

You often read on this page that Canada only produces 1.6 per cent of the world’s greenhouse gases, which is true (give or take: it’s a hard calculation). I’m never sure exactly what people are trying to say when they stress that. One possible meaning is that we can’t solve the global warming problem on our own, which is clearly true: If we Canadians all held our breath forever and also gave up all other ways we produce carbon dioxide — which would happen quite naturally just minutes after we did all shut down our breathing — that wouldn’t solve the problem.

No one disagrees on that. But now, accept for a moment that greenhouse gases are a threat to the planet’s average temperature — and I do understand many readers are skeptical, whether of that basic proposition or of our ability to devise anything close to accurate predictions about where on the threat scale we currently are — what should a 1.6 per cent country do?

Do we change our behaviour, whether or not any other country does, so we at least can feel we’re doing the right thing? Do we keep lobbying others to change, promising as we lobby that when they change we will, too. Do we focus on big emitters — China, India, the U.S. and Europe — and try to use our leverage, if we have any leverage, to get them to act? Is acting first ourselves necessary to that lobbying effort? Leading from ahead, as it were, instead of “leading from behind”?


Video: Why climate change could lead to a financial crisis (and what we can do about it (CNBC)

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If you watched the parade of nations in the Olympic opening ceremonies, well, first: congratulations, you’re the only person who did. With over 200 countries/entities, it was, as many commentators pointed out, really boring television. But that’s the global problem. If carbon emissions were private goods, the emitters would pay the consequences. But carbon emissions are public goods — or, more precisely, bads. Carbon emitted anywhere affects the atmosphere everywhere for everybody. Which means everybody can free-ride on everybody else. Dumping my carbon into the sky relieves me of the cost of neutralizing it while creating only minuscule harm to me — though if everyone takes that view, aggregate harm adds up.

Global public goods or bads are a big problem in a world of more than 200 entities. Ever try to get 10 people, let alone 200, to agree on which restaurant to go to? If President Xi fulfills his apparent ambition and takes over the whole shebang, that at least internalizes the externality: as dictator of the entire planet, he could change global behaviour. But even if global dictatorship did end global warming, that would be a high cost.

The more you think about the global collective action problem, the less you think it will get solved. On the other hand, as the Economist noted this week, though global warming and the harm it may do is a public bad, many of the benefits of adaptation against it are private goods. If, for instance, I move to higher land to avoid rising sea levels, I will have had to bear some cost but I’ve also made it to dry land. I have compared the cost of acting with the benefit of acting and, with the benefit greater than the cost, have acted.

Yes, it might be better if everyone reduced their emissions so the waters didn’t rise in the first place, but getting all humans to do something together is a very big ask. It’s also true that not all adaptation involves only private goods. If I want to put a moat around Venice, say, I can’t do it myself. Venetians will have to somehow organize themselves.

The world as a whole isn’t great at providing global public goods, like emission reduction. All the world’s bits, however, from individuals up to city and provincial governments, are a little better at providing the local public goods that many forms of adaptation are.

People debate whether it’s best to prevent global warming or adapt to it. The more important point may be that, whichever is best, because adaptation involves private goods, it’s more likely. That’s one global warming prediction that probably is fairly robust.

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