Why economists are so important to solving environmental problems

An interview with EDF economist Gernot Wagner


If individual actions are not enough, what will bring about environmental progress?

Gernot Wagner, a Harvard-trained economist (and new father) answers this question by doing what many consider the impossible: He wrote an enjoyable book about the economics of global warming.

In 2011's But Will the Planet Notice? Gernot provocatively challenges the usefulness of the popular green slogan, “Think Global. Act Local.”

“Scientists can tell us how bad it will get," he writes. "Only economists can help guide us out of this morass and save the planet.”

The book was well received: Leading environmentalist Bill McKibben called the book "an awfully good place to start." UCLA environmental economist Matt Kahn asks "who knew that an economist not named Krugman could write so well?" And the web site The Daily Green described it as "lessons in economics and global environmental problems, from a guy you'd actually talk to at a party."

When the book was published, we sat down with Gernot to talk about his ideas, and why economics is so important to solving environmental problems.

Polls show that climate change ranks low among Americans’ concerns these days. So why write this book?

Because it is possibly the most important issue facing the world, and it has to get back on the agenda. Also, for too long, environmental organizations have told people that if only they recycle and buy local produce in season, they can stop global warming.

Sadly, that’s not so. And talk like that may even have contributed to the public’s current disillusionment. Environmental sainthood just isn’t the answer. If everyone did the right things tomorrow, it would slow global warming, but not stop it.

If individual actions are not enough, what will stop it?

The answer is rooted in policy—making it in people’s self interest to do the right things. Every ton of carbon emissions causes around $20 of damage—that’s the price of global warming. Right now, polluters pay virtually nothing of that cost. When I fly across the country and emit one ton of carbon, the ticket price does not reflect the damage the airline and I are doing to the planet.

So, we need policies that essentially make everyone who pollutes—be it the airline, a company or a person—pay for that privilege. The economics are simple and at least a century old.

How will that solve the problem?

When polluters pay, they’ll think twice about polluting. More importantly, when becoming greener profits you personally, that’s what you’ll do. And that’s where companies will put their money and innovative energy. A price on carbon emissions or an outright limit, a cap, will drive costly pollution out of the marketplace.

You raise an important point in your book – that we currently allow polluters to privatize the profits, but socialize the environmental costs. Can you describe what you mean?

When I chew gum in public with my mouth open, I get to enjoy the gum, but everyone around me faces the costs of having to look at and hear me doing so.

The same applies on a larger, much more disturbing level: A coal plants gets to make a profit selling electricity, but everyone around it faces the consequences of having to breathe in the dirt coming out of its smokestack.

The solution? Close your mouth while chewing gum, or face the consequences. In the case of the coal plant, either limit or pay for your pollution.

You recently became a father. Did that change the way you view your work?

Absolutely. I always found it a bit trite when environmentalists talked about leaving a better planet for their children. But that’s exactly what I think about when I come home at night and look at my son in the crib. It’s also what gets me out of bed in the morning.