Why haven't we done more on climate change?

The answer is complicated, but flawed economics is at the heart of it

As COP28 kicks off in Dubai, questions about corporate capture, the conference’s effectiveness, and the leadership’s ties to the fossil fuel industry abound. Every year, it feels like a frustrating paradox. At once, there is so much conversation about national commitments, fossil phase-out, and bold climate action. At the same time, it feels like progress is far too slow and the process is still being co-opted by corporate actors with a huge investment in nothing being done. 

There are many known reasons why action has been delayed on climate change: lobbying and misinformation from the fossil fuel industry, slow scaling of technology, and simple deprioritization from governments (among many other causes). What doesn’t get spoken about as much, however, is the role of economists and their climate models. Although they might seem peripheral, mainstream economic models–and the assumptions they make about the world–are right in the middle of the story, which is the one we want to focus on today.

The IPCC, the EPA, and many other governing bodies for climate use a kind of model called an Integrated Assessment Model, or IAM. The most famous of these is called the DICE model. It was invented by an economist named William Nordhaus, who received the Nobel Memorial Prize in 2018 for his work on the economic costs of climate change. 

These kinds of models measure the impacts of climate change on the economy. In recent years, they’ve come under more scrutiny as their conclusions have become increasingly out of step with those of climate scientists. Nordhaus’ model, for example, concludes that fossil fuels don’t actually need to be phased out until the late 21st century, and with modest adaptations, the economy can fairly easily adapt to a warming of between 2.7-3.5 degrees Celsius (a scenario most climate scientists agree would be disastrous). His models claim that a 3 degree temperature rise would decrease global GDP by only 2.1 percent, and a 6 percent rise only by 8.5 percent. To him, these reductions are acceptable, and there is no need for swift action. We can adapt slowly, later on in the century, after we’ve allowed the economy to grow further as it has been doing thus far. 

The main issue with mainstream economic models is that while they are supposed to be based in science, they in fact rely on extremely unscientific assumptions that misrepresent how climate change and human societies actually interact. While the climate crisis is a complex phenomenon subject to deep uncertainties and with many potentially destabilizing consequences (i.e. mass migration, food systems collapse, conflict, spiraling adaptation costs, political dysfunction), mainstream economic models reduce all climate-society interactions to a single metric–the relationship between temperature change and GDP. The paradoxes created by this deeply simplistic worldview are elaborated in detail by Christopher Ketcham in his article for The Intercept.

As one example, Ketcham criticizes Nordhaus’ claim that because 87 percent of GDP occurs indoors in “carefully controlled environments,” it will not be affected by climate change (an assumption which conflates the climate with the weather). This is just one instance of how hubristic assumptions about the way nature works have failed to account for the true complexity of the problems facing humanity in a way that puts our collective future at risk. 

Over-relying on mainstream economic models for decades has had dire consequences. When policymakers take Nordhaus’ conclusions as reflections of reality, their conclusion is often that delaying climate action is not only fine but actually the more prudent choice. According to many mainstream economists, acting now through aggressive climate policy would damage economic growth and therefore make us less well-positioned to continue that adaptation later on. We should rather focus on growth now, so that we can tackle the issues from a wealthier future position. This is based on the common assumption that the market is currently working optimally without climate policy, so any limits imposed on it will come at a cost. (Other economists like Joseph Stiglitz have pointed out that this view doesn’t take into account the potential opportunities presented by clean energy and other sectors of the economy where innovation is taking place.)

Nordhaus’ models are certainly not the only way of modeling the climate, however. They’re just the most widely used models. More comprehensive models that do a better job of modeling complexity exist but are often pushed to the margins. There’s an entire field called complexity economics that attempts to address some of the shortcomings of the mainstream models. An economist named Gaël Giraud designed a model that takes into account extreme climate risk and potentially irreversible tipping points for the economy. However, these are not the models being used by the main decision-makers in either government or industry. (For further information about alternative approaches to climate modeling, see this briefing note). 

This isn’t a coincidence. Once climate change denial fell out of vogue, fossil fuel companies turned to economists in their quest to delay climate action. As researcher Benjamin Franta explains, a group of influential economists in the 1990s whose work was paid for by the fossil fuel industry “helped convince the public and policymakers that climate policy would be costly, global warming would be relatively unimportant, and there would be little harm in delaying action.” Even though their methodologies favoured industry and were paid for by fossil fuel companies (without the knowledge of the public), their conclusions were widely adopted as conventional thinking. 

The divide is so stark that it sometimes feels like climate scientists and economists exist in two different worlds.  Right now, scientists are ringing alarms about how environmental tipping points are happening faster than predicted, and how catastrophic climate scenarios could imperil human civilization. At the same time, mainstream economists continue to write peer-reviewed papers arguing that climate tipping points will barely make a dent in GDP–even in a world where Europe is in a perpetual ice age, where food production plummets, where over a billion people are forced to migrate. As long as these conversations continue in siloes, we will be incapable of addressing the challenge that lies ahead of us. 

Cartoon source: Scientific American.

If we delve even deeper past these particular methodological problems, however, we uncover some of the more fundamental issues with the worldviews that underpin our attempts to model the climate in the first place. 

The Problem with Reductionism

The fundamental assumption underpinning mainstream economic models is that nature functions essentially like a machine. This idea is deeply embedded in Western thinking, stretching back all the way to the Enlightenment. It still guides a lot of our understanding of the world today. 

This metaphor of nature as a machine is based on an idea that is the foundation of Western science–reductionism. It’s the idea that to understand nature, you have to take it apart into smaller and smaller pieces in order to figure out how the whole system works. This approach has led to some amazing successes in medicine, physics, molecular biology, and numerous other fields, leading to countless inventions from antibiotics to atomic energy. However, because of the widespread successes reductionism has brought, many fail to question whether it is still the most useful framework to guide our thinking in the context of complex, intersecting socio-ecological crises. 

The way that economic models treat the natural world is inherently reductionistic. First of all, these models treat the economy as though it exists in a vacuum, a self-contained contraption where external inputs (nature, energy, raw materials) appear essentially out of thin air, in limitless quantities. This flawed idea, that GDP growth appears out of nowhere, is known in econ-speak as GDP being “exogenously determined,” and it is why economists are able to claim that GDP growth can continue without limit. This assumption also lies at the heart of the foundational split between mainstream environmental economics and the field of ecological economics, which seeks to create economic models that acknowledge the inherent embeddedness of markets within natural systems. 

Secondly, mainstream economic models use reductionism to isolate complex climate-economy interactions into just a few simplified variables (i.e. temperature change and GDP), and then construct a mechanistic relationship between these variables, where change in one will result in a proportional and predictable change in the other. In reality, complex systems do not behave in linear ways–think of a bridge which sustains significant water damage over many years, and then suddenly collapses. Climate tipping points work similarly; they are, by definition, the points at which linear relationships break down. At these points of extreme stress, the equations we use to model reality no longer apply. Talking about “GDP growth” in these contexts quickly becomes a useless exercise–what value will GDP have if a global drought leads to multi-breadbasket failure, plunging billions into hunger? This is not a meaningful question. 

This doesn’t mean that models aren’t useful. They can help us to predict likely scenarios under different pathways, which is important for planning and assessing risk. What it does mean, however, is that we must be extremely careful not to mistake the model for reality. The map is not the territory. 

Treating our models as though they are substitutes for reality has many perverse consequences. For one thing, seeing the global climate system as one giant machine is what allows us to assume that we can use speculative techno-fixes, like geoengineering or large-scale carbon removal, to reverse devastating climate impacts. In reality, tipping points might mean that major climate impacts are irreversible, rendering geoengineering useless. Additionally, any large-scale interventions we might make in a last-ditch effort to alter the balance of the climate system could have major unintended consequences of their own. Sucking carbon out of the air might seem like a great idea in principle, but we really have no understanding of what that action will trigger in the rest of the global Earth system, making it an incredibly risky way forward. 

But the even bigger underlying issue is that these machine-like metaphors actually serve to maintain the status quo, and delay the transition. In such a world, like the economists say, we can continue with business as usual until we achieve “optimal” growth, and then suddenly reverse course whenever we want. This belief is based on the flawed notion that human beings are the ultimate masters of nature, which is the height of anthropocentric arrogance. Additionally, the assumption of a predictable relationship between GDP and temperature change is what allows us to make deeply inhumane trade-offs, such as the idea that GDP losses in the Global South will be offset by GDP gains in the Global North (where climate change supposedly leads to balmier weather). This ruthless assumption disguises dramatic losses of human life as just another “cost of doing business”–a belief that is, and has always been, at the heart of colonialism. 

The reductionist worldview is made possible by another deeply embedded belief in Western philosophy: dualism. This is basically the idea that human beings are fundamentally separate from nature, an idea which serves as the foundation of modern science. René Descartes, called the father of the scientific method, is quoted as saying “I do not recognize any difference between the machines made by craftsmen and the various bodies that nature alone composes.” In this formulation, nature is effectively empty. Human beings are the sole place where spirit, intelligence, and consciousness lie. At the core, this is how we came to see the entire earth as a resource to exploit and control, rather than as a living thing with intrinsic value. 

René Descartes. Photo: MIT Press.

Our entire paradigm for addressing climate change is still centered on these worldviews–reductionism, dualism, separation. The conversation is focused on the need for energy substitutes to continue growing the economy, or on carbon removal to lower emissions. But nowhere are the basic cultural narratives about our relationship to nature actually challenged. This is something that the models cannot capture. They attempt to quantify things like the value of future generations through discount rates, when these are fundamental ethical choices that must be deliberated on by a society, rather than simply being inputs to a model.

A lot of the work of this century will include deciphering which parts of our existing knowledge systems are fit for the twenty-first century and which ones–even ones that worked well in the past–are no longer fit for purpose. The paradigm of reductionism we have held onto for so long must be moved aside in the context of climate change and other disciplines such as systems thinking, complexity sciences, and chaos theory must be brought closer to the forefront. 

We cannot solve the problems ahead of us using the same thinking that brought us here. A more fundamental reimagining is required. Imagine, for example, if we saw nature as something we belonged to, rather than something that existed outside of ourselves, something to control. What would the solution-making process look like? How would it be different to what we’re doing now in the boardrooms of COP28? 

On that note, we’ll end with a quote from Rachel Carson, environmentalist and author of the influential book Silent Spring, which warned of the dangers of the chemical DDT back in the 1960s. Shortly before her death, she wrote: 

 "Man's attitude toward nature is today critically important simply because we have now acquired a fateful power to alter and destroy nature. But man is a part of nature, and his war against nature is inevitably a war against himself? [We are] challenged as mankind has never been challenged before to prove our maturity and our mastery, not of nature, but of ourselves."

1. This article from The Intercept, referenced in the newsletter, goes into much more detail about Nordhaus and the problems with his DICE model. It’s worth a read to understand the degree that these models fail to reflect reality. 

2. This report from the Global Systems Institute discusses the reality of global climate tipping points, and explores the non-linear nature of how they interact with one another to create complex and unpredictable outcomes.  

3. This article in The Baffler provides a provocative but sober look at the inherent unsustainability of contemporary capitalism, and the extractive circuits that underlie modern consumption patterns which perpetuate global injustice.

4. This essay from Aeon talks about the work of Bruno Latour to expand our definition of who counts as an actor to beyond the human sphere. The tagline says it best: “Bruno Latour showed us how to think with the things of the world, respecting their right to exist and act on their own terms.” Latour’s book, Down to Earth, was a major namesake for this newsletter, and we highly recommend checking out his work.