Why Spending to Fight Climate Change Makes Economic Sense – A Non-political, Logical Analysis by a Famously Rational Guy

climate change

Carl Sagan once wrote, “For me, it is far better to grasp the Universe as it really is than to persist in delusion, however satisfying and reassuring.” In other words, he dealt in facts.

For those who are not old enough to remember Carl Sagan, he was an astronomer, planetary scientist, cosmologist, astrophysicist, astrobiologist, and author who was able to explain complex things in beautifully simple terms and cared deeply about making science accessible to everyone. He co-wrote and hosted the award-winning television series Cosmos: A Personal Voyage, which is the most widely watched series in the history of American public television and has been seen by at least 500 million people in 60 countries. 

In a talk he gave way back in 1990, Sagan discussed why it makes sense to spend a lot of money to deter and mitigate the possible effects of something that could be catastrophic, even if there is some debate about whether that thing is inevitable. He compared military spending during the Cold War period to build up the U.S.’s military capabilities in response to concerns about what the USSR might do to the decision we face today about spending to fight climate change. 

We walk through Sagan’s rational, fair-minded analysis below, but encourage you to watch the video in its entirety (and yes, he does say “billions and billions” at least once!).

  1. Clearly, there is such a thing as a greenhouse effect. Without it, the earth would be frozen solid. So, we and every living thing on earth owe our lives to the fact that the greenhouse effect exists.
  2. The level of greenhouse gases (GHGs), including CO2, methane and others, in the Earth’s thin, fragile, and vulnerable atmosphere is increasing. While the increase is not strictly linear, the trajectory is clear. 
  3. It is also clear that the hottest decade on record (which has since been surpassed) is the decade with the highest level of GHGs. By evaluating bubbles of air trapped in the ice in Antarctica over 10,000 years or so, we can see that the greater the amount of CO2 in the atmosphere, the higher the temperatures, and vice versa.
  4. Does a warming trend lead to further warming (a “positive” feedback loop, which is actually negative in terms of its consequences)? Usually, but not always. Nonetheless, the “positive” (bad) feedback that creates more and more warming clearly dominates the occasional “negative” feedback.
  5. Even though various climate models may differ in the details, the almost every model predicts the world will get hotter. Despite their differences, the models’ predictions are all quite similar. By 2050 (remember, this was based on evidence 30+ years ago), all of the models predict that every place in the world will be warmer.
  6. Some predict the American Midwest – the breadbasket of the world – will have a desert-like climate and will no longer grow the grains that feed us. And, as sea levels rise, entire countries will be flooded, displacing tens of millions of people who will become Environmental Refugees. The economic implications are immense.

For these reasons, Carl Sagan took predictions of global warming very seriously. He also acknowledged that some people do not believe that these dire predictions are inevitable and thus resist spending money to fight climate change. In response, he asks the following: 

What if this pushback had prevailed at the height of the Cold War? Starting in 1945, the U.S. spent a total of about $10 trillion (that’s $19.2 trillion in today’s dollars) fighting the Cold War. Were we sure the Russians were going to invade? Obviously not 100% sure! What if we were only 10% certain? There was still a strong argument that we still had to prepare for the worst case because the outcome if we were not prepared could be disastrous.

What could you buy for $10 trillion in 1990? According to Sagan, everything in the U.S., except the land. Every house, building, truck, bus, car, airplane, article of clothing, etc. It was a huge amount of money, spent to protect us against something that was uncertain, but potentially catastrophic.  

Sagan then asks, why doesn’t the same argument apply to spending to fight climate change? Even if you think there is only a small chance that the predictions are correct, the consequences are so dire, isn’t it appropriate to spend today to try to prevent that catastrophic outcome, just as we spent enough money to buy everything in the U.S. to ward off a Russian invasion?

Sagan then points out (and this gets at the heart of ESG investing) that unlike military spending, which benefits only a segment of the economy for a limited period of time, all of the money we would spend fighting climate change would be economically beneficial EVEN IF CLIMATE CHANGE DOES NOT HAPPEN. He suggests taking the following steps:

  • Eliminate chlorofluorocarbons, which at the time was the fastest-growing type of GHG (this was done in the U.S. and elsewhere under the Montreal Protocol) 
  • Make generating electricity more efficient; a more efficient process burns less fossil fuel, which lowers GHGs
  • Automobiles are the worst offender in terms of creating CO2 emissions in the U.S. Why allow cars that get 15-20 mpg when we know how to make cars that get 50+ mpg? Remember, this was pre-EVs. 
  • Seek alternatives to fossil fuels that do not emit GHGs. Wind, solar, geothermal are all extremely promising (again, this is 1990!). 
  • Use nuclear energy with certain conditions regarding safety, and preventing production of weapons-grade uranium
  • Plant more forests, which capture and store CO2, instead of destroying them, as we are doing every second
  • Confront the world population crisis, as population growth means GHGs will increase. Sagan argues forcefully that when per capita income rises, family size declines. The phenomenon has been observed in every part of the world.

Lastly, he shows that these steps make economic sense on their own, whether you believe in global warming or not:

  • More efficient electricity is good economics, and increases our energy security. Making better use of the oil and gas we have already found is as good as/better than drilling to get more
  • Developing alternative energy sources is also good insurance against the day when we run out of fossil fuel, and there is money to be made here!
  • Plant forests. Preventing deforestation protects biodiversity, including the potential pharmacological benefits of species who live in those forests and related ecosystems.
  • Reduce global population growth. This would help future economic stability and food security in countries around the world.

CO2 emissions do not recognize national boundaries and the impact of fighting climate change will take time. Therefore, it requires an global, trans-generational, non-political effort. We cannot emphasize enough this point that Carl Sagan made: a financial commitment to head off this potential catastrophe will yield substantial economic benefits, with 100% certainty.

P.S. The day we wrote this article, Yvon Chouinard, the founder of Patagonia, the outdoor gear and apparel company, announced he was donating his entire ownership of the company to the cause of fighting climate change. While it’s not $10 trillion, it is over a billion. Perhaps he sees that if we do not confront this threat in a serious way, the “great outdoors” that people enjoy so much today will no longer exist, which means Patagonia’s business depends on it.