 We still have time to stop the most catastrophic outcomes. It's not too late. So what have economists contributed to understanding the problem of climate change? Earlier, we talked about the shortcomings of conventional approaches, but there's another indictment to level at the profession. They've been late to the game. In part, this is because in some ways they got it horribly wrong at the beginning. There were a few important interventions just as the reality of global warming was being recognized in the late 70s and early 1980s. William Nordhaus himself weighed in with a 1979 paper that argued that global warming would be positive. The main argument had to do with higher productivity in agriculture. This paper obviously suffered from many flaws and set the debate off in exactly the wrong direction. Another crucial intervention was from Thomas Schelling, who helped write a highly influential National Academy of Sciences report in 1983 on climate change, the first such report. Schelling argued that instead of reducing emissions, people should just migrate and adapt. It would be wrong to commit ourselves to the principle that if fossil fuels and carbon dioxide are where the problem arises, that would also be where the solution lies. Now why did economics take this tack? One reason is the dominance of trade-off thinking. As any Econ 101 student knows, the big message from the discipline is trade-offs. The idea is that the economy is functioning optimally and there are no free lunches, that is, ways to make one person better off without harming another. In the environment case, trade-off thinking appears in the guise of, say, climate protection versus consumption. The logic of this argument is that to get a better climate, we have to give up consumption. This argument is encapsulated in this simple graph, which is called a production possibility frontier. The no-free lunch idea means that we're on the so-called frontier, or outer edge, in which climate mitigation entails giving up other goods and services. That's the basis of the cost-benefit calculations I've discussed earlier. Now there turn out to be multiple problems with the production possibility frontier approach. The most serious is that a well-functioning climate is the basis for producing goods and services, not an alternative to them. Trade-off thinking may make sense for small choices within a healthy ecosystem, such as whether or not to turn some land into a park or how much non-lethal pollution to abate. But it's a disastrous idea for problems that cause planetary disruption. One reason is that it overestimates the positive contribution of more income to wealthy nations who are historically the biggest polluters. In 2017, the richest top 1% of people in the world captured 82% of all the increase in GDP. In 2020, the top 1% of households globally owned 43% of all personal wealth, while the bottom 50% owned just 1%. Another reason for the late start of economists as climate activists is that externalities didn't just apply to the climate. The discipline itself had an externality problem. Climate change economics was quite literally externalized from the core of the field itself. Looking at the last decade as the urgency of addressing climate change is much greater, the top econ journals clearly did not step up. One way to see this is through an analysis of journal publishing, the lifeblood of many disciplines. We did a simple analysis of articles that mentioned climate change or global warming in either the title or the abstract in the top five journals in the field. From the time James Hansen delivered his pathbreaking testimony to Congress identifying the threat of climate change, that was 1988 to the present. Since then, these journals have published thousands of articles. What we found is striking. Two of the top five journals had zero articles with either of these terms in the title. Only two had the term in the abstract and not the title. Altogether, only 35 articles appeared with these terms in the title or abstract over this entire period. Other researchers have done something similar. An analysis of the top five econ journals over the period 1957 to 2019 found that of nearly 20,000 articles published, climate change and global warming appear only 26 times in the title and 32 times as a topic. Just half a percent of articles had it in the title and under 2% as a topic. Now it's also the case that climate economists themselves are externalized from economics departments. Quite a few of the top departments in the country don't have members who work on climate change. Sometimes there's only a sole faculty member who works on these issues even though some of these departments have 50, 60, even 70 people. Given that climate destabilization is an existential threat to humanity, this absence is striking. These universities all do have economists who work on climate, but they're more likely to be located in policy schools and research centers. They are externalized from the core of the discipline. And that situation comes with another kind of problem. Those centers and schools are much more likely to have financial ties with fossil fuel companies. One inescapable fact is that energy and environmental economics, the standard term for the subfield, is tied up with fossil fuel companies. The National Bureau of Economic Research, the nation's most prestigious economic research institute, has an energy and environmental program and it takes funding from ExxonMobil. In fact, ExxonMobil is one of the few corporate sponsors identifiable on their website. Policy schools and interdisciplinary centers that have economists are also funded by fossil fuel companies. The MIT Energy Initiative's founding members are N.I., an Italian oil and gas company, ExxonMobil and Shell. Chevron is a sustaining member. These companies also sponsor the MIT Joint Program on the Science and Policy of Global Change. Shell is a sponsor of the Stanford Energy Club and the Oxford Institute for Energy Studies. And the latest trend in financing between the fossil fuel industry and higher education is the American Petroleum Institute's educational partnership with historically black colleges and universities and other minority serving institutions. This is a particularly insidious move by the fossils. While HBCUs and MSIs deserve far more funding than they get, fossil fuel extraction has been highly and disproportionately harmful to black, brown and indigenous communities. From the Gulf Coast of Louisiana to the poor neighborhoods of Los Angeles, black, Latinx and indigenous communities are exposed to a much wider range of toxic pollution and environmental harms than whites. A recent study by historian of science Benjamin Franta entitled, Weaponizing Economics, revealed the central role of economists who were paid by petroleum companies in promoting models that churned out results opposing climate action by claiming it is too expensive and that climate impacts wouldn't be too bad and that delay wouldn't be too costly. It's hard to avoid the conclusion that for those pushing for an effective climate response, the discipline of economics has mainly been a weapon used by interests whose main motive is to avoid action. These ties between fossil fuel companies and energy and environmental economists suggest the need to look more closely at the fossil fuel companies themselves to understand why climate action has been so difficult to achieve. Now on one level this seems obvious. We have a great deal of evidence about how these companies knew about the destructiveness of their products, hid their findings, funded climate denial and captured politicians to do their bidding. One part of their success has been the way responsibility for emissions has been obfuscated by what I call the Pogo problem. This term is from a classic cartoon strip entitled Pogo. Its famous line is, We have met the enemy and he is us. Not ExxonMobil, but me and you. For years the Pogo formulation dominated the popular consciousness about climate change. It takes the view that we're all responsible because we drive cars, take airplanes and use fossil fuels. This formulation underlies the production possibility frontier tradeoff between mitigation and consumption. It underlies efforts to get people to change their habits, to screw in new light bulbs, to eat less meat, to be the change. And here's a tidbit. The very concept of the carbon footprint, a Pogo idea if there ever was one, was invented by British Petroleum in 2004. What size is your carbon footprint? Ah, the carbon footprint. Naming consumers as the problem suggests we're all responsible because we're all consumers. It deflects attention from the producers. Pogo reasoning underlies the free rider approach I discussed earlier because the diagnosis of free riders suggests the needs to corral everyone into a solution. All countries are thought of as similar, all people, agents, to use economists term, are alike. The integrated assessment models of economics are also built on this principle. But we just need to look at the patterns of emissions to see that the Pogo story is deeply misleading. Its alternative is the political economy approach. It starts by looking at who has interest in continuing to emit greenhouse gases. Who's benefiting? Who is bearing the costs? When we do this, we're right back to the fossil fuel companies, the countries they come from, and the people who are disproportionate emitters. Equal responsibility and impact is not what we find. This is a highly concentrated problem at every level we consider nation, corporation, household. The responsibility for emissions is highly disproportionate at every level. We've already looked at current emissions and how they are coming from a few countries. What are called legacy or historic emissions, the cumulative pollution a country is responsible for historically, is slightly more disproportionate. Four entities are responsible for two-thirds of all historic emissions. What about by corporations? There are 100 so-called carbon majors, the entities that are most responsible for carbon pollution. Are many of the same names we've already been talking about? ExxonMobil, Shell, BP, Chevron, Coal Giant, Peabody, and Total. These 100 companies account for 71% of all emissions. Historically, they account for just over half of all the emissions that have ever been produced. There's another type of disproportionality or inequality, and that's by household. Emissions vary a lot across households, with the most well-off being responsible for far more carbon pollution than middle and low income households. This is true both within individual countries and across the globe. Within the United States, for example, households that earn more than 200,000 a year, they're about 6% of the population, had a per capita greenhouse gas footprint that's 2.6 times that of the lowest group. They earn about 15,000 a year and account for 9% of the population. The top group emits 32 tons of carbon, whereas the lowest group emits 12. The global average when these calculations were done was about 5 tons, and the U.S. average was about 18 tons, or more than three times the global mean. This disproportionality also shows up if we think about growth in emissions. I especially love this visual, the Brontosaurus shape of global responsibility for polluting. Here we divide into what are called ventiles, or 20ths of the distribution, which allows us to see the extreme disproportionality more clearly. The impact of the world's richest people is unmistakable. Nearly half of the total growth in emissions from 1990 to 2015 was due to the richest 10%, those top two ventiles, with the richest 5% alone contributing 37%. The remaining half of emissions was due almost entirely to the contribution of the middle 40% of the global income distribution. That represents the next eight ventiles. The impact of the poorest half, the bottom 10 ventiles, practically negligible. What all this means is that some people have strong interests in the status quo and prefer to forestall climate action. They are unfortunately the most powerful companies in countries. Others have strong interest in vigorous action. They are island nations, the poorest countries and regions, and the poorest households. In the United States, Latinx and African American residents are the strongest supporters of climate action, while whites, and particularly white Christians, are most likely to believe the disinformation campaigns of the fossil fuel industry and their allies, and to support climate denier politicians. This makes sense given that Latinx, African Americans and indigenous people are already suffering the greatest harms from climate change and are likely to be most vulnerable going forward. But these groups don't have much power. That's part of why emissions continue to rise even though it's a suicidal path for humanity. So what are the key elements of the political economy explanation for climate action? The first is the opposition of the fossil fuel industry to climate action. In 2015, some bombshell reporting unearthed the dirty secret of these companies. They knew. Exxon and other companies had a long history of doing climate science themselves. A trove of documents as well as information from company scientists has established that as early as the 1960s and to some extent earlier, Exxon and Shell knew what their products were doing to the planet. By the early 1980s, internal documents reference, quote, potentially catastrophic events if fossil fuel use is not reduced. Coal companies such as Peabody Energy, now bankrupt, also knew at that time. In fact, Exxon had been doing observational climate research in the oceans and in the 1980s developed a sophisticated climate modeling group that was able to fairly accurately predict much of what would later happen and what subsequent models found. But in 1989, not long after James Hansen's testimony to Congress, the company shifted to climate denial and its researchers lost their scientific objectivity. We also know Exxon spent millions setting up phony think tanks that push climate denial, successfully creating uncertainty, and bamboozling the media and the public. Exxon is now being sued by Massachusetts Attorney General Mora Healy for its deception. And numerous cities and other entities around the world are also suing these companies for the damages that their destructive products have caused. The second part of the political economy explanation is what we call captured government. While the fossil fuel companies worked on political opinion, in many places their most potent weapons have been politicians themselves. In the United States, the link between fossil fuel companies and elected officials' climate positions is typically through a flow of money. The fossil fuel companies capture politicians in numerous ways, through direct campaign contributions, PAC contributions, lobbying, advertising, and policy influence. Even in 2021, a non-election year, fossil fuel companies were set to spend $55 million in direct funds to candidates. And this is only a small fraction of what they'll spend indirectly through PACs and related groups. The largest single contribution comes from the white supremacist, anti-mass coke industries, climate denier extraordinaire at over $5 million. In 2018, oil and gas companies gave more than $84 million directly to candidates running for the U.S. Congress, twice what they gave in 2010. And all that money has bought the fossil fuel sector a powerful veto machine in the U.S. Congress because this money purchases votes. For every additional 10% of congressional votes against the environment in 2014, a legislator received additional $5,400 in campaign contributions from oil and gas companies in 2016. Now in the United States, the fossil fuel industry has historically supported both parties, which has been key to climate inaction. In recent years, their control of policy has been more lopsided. They've got a complete lock on the Republicans where it's fatal to support climate action. At the same time, Democrats have been slowly weaning themselves off fossil fuel money. That's why climate policy has gotten as much of a hearing among Democrats as it has. There are still 30 GOP senators and 109 House representatives who do not acknowledge human actions causing or impacting climate change, a majority of Republicans in the U.S. Congress. Over the course of their careers, these representatives received over $61 million of direct funding from gas oil and coal companies, or about $450,000 per person. Perhaps most concerning is the fact that climate denial is not going away. Of the 69 new representatives and senators elected to Congress in 2020, one-third deny the science of climate change, including three of the four new Republican senators. There are no Democrats who actively deny climate change. However, in 2021, Joe Manchin, the most influential person in Congress on climate legislation as head of the Senate Committee on Energy, as well as the Democratic Party's 50th swing vote, received more money from the fossil fuel industry than any member of Congress, be they Democrat or Republican. And for that cash, Manchin has adamantly supported fossil's interests, insisting that he would kill any bill that gave renewables more support than fossil fuels. He has been successful in eliminating the strong climate provisions from the Biden administration's Build Back Better and Infrastructure bills, and as of this filming in preventing Build Back Better from becoming law. Kristen Sinema from Arizona has joined him in this potent climate obstruction. Manchin, who hails from coal company, also has extensive personal and family interests in coal production. He and Sinema have the lowest lifetime scores on climate and national environmental issues among all Democratic senators, according to the League of Conservation Voters. Now the U.S. is one of the more extreme cases in terms of fossil fuel control of the state, but it reflects the general pattern that countries with larger and more important fossil fuel industries are less likely to support ambitious climate goals. Those without national fossil fuel sources have been stronger on climate. It's not true in every case. For example, there are some places like Brazil where forests are the more relevant resource. But in general, there's an association between climate stance and size of fossil fuel industry. Here's one measure of how major countries' climate policies stack up, the Climate Action Tracker. The countries in orange have an insufficient score from Climate Action Tracker. The red are highly insufficient and the black critically insufficient. The climate laggards are places like the U.S., China, Russia, Saudi Arabia, all with large fossil fuel sectors. Iran and Iraq are also in that category. But other fossil fuel dependent countries such as Australia and Canada, Kazakhstan are also highly insufficient. Of course, it's not only fossil fuel companies who determine climate policy, although they are the main actors in many places. Other constituencies also weigh in and influence government policy. Labor unions, especially in carbon-intensive sectors, have also played an important role in some countries in forestalling climate policy. Matto Mildenberger's analysis of climate policies shows that in a number of countries, Australia, Norway, Germany, a coalition of companies and labor unions have come together to veto carbon taxes or to reverse them after they've been passed. Because the carbon-based economy is so widespread and climate action requires full decarbonization, there are plenty of people who stand to lose when policy is enacted. So that's the core of the political economy approach, linking action and inaction to economic and political interests. Solving the political economy problem requires new ways of thinking about transcending the interest-based conflicts that have led to gridlock and climate inaction. That means not only just transitions, i.e. protections for workers and residents who will lose in the transition, but also out-of-the-box approaches that provide benefits that haven't typically been part of the climate conversation. Because the misdiagnoses and old approaches, like pogo or technocentrism, have been too narrowly focused. In fact, when we consider all the other problems that capitalism is beset with, extreme inequality, structural racism, sexism, the democracy deficit, overwork, we can see that there are double and even triple-dividend approaches that can make people better off while also vigorously addressing climate destabilization. We take those up in the next episode.