There is a widespread consensus among climatologists that climate change is occurring and that it is being driven by the emissions of greenhouse gases, primarily CO2. Moving away from the carbon-based fuels (coal, natural gas, and petroleum) that drive these emissions will be very difficult, although progress is being made on a variety of alternatives. However, one obstacle to this transition which is widely suspected–the opposition of the private and public companies that make a lot of money selling these carbon-based fuels–is difficult to measure. Sean McElwee and Lew Daly have written an essay that gives some ballpark estimates to how much money would be lost to these companies if the world were to stop using these fuels. The number is actually staggering, and the size of the loss explains the vigorous efforts these companies have made trying to undermine the climate change debate. Here is their estimate of the dollar losses to those companies that own reserves of carbon-based fuels:
If the international community is serious about limiting warming to 2 degrees Celsius, carbon assets may face a $20 trillion write-down (the U.S. GDP was $15.7 trillion in 2012).
Such economic losses would have tremendous economic repercussions. But a radically changed climate would also have extreme economic consequences.
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If I understand correctly, the $20 trillion figure represents a loss to the fossil fuel industry, not a loss to the economy. As with any policy change, there would be winners and losers. While carbon-intensive companies stand to lose from a carbon tax, many industries would benefit, including solar, wind, and nuclear energy companies. Costs associated with global warming incurred by coastal property owners, agriculture, ski resorts, etc. would also be mitigated. The cost to the overall economy would presumably still be significant, but considerably less than $20 trillion.
Reducing demand for fossil fuels would also deprive some countries of their primary source of revenue, with potentially interesting political consequences. Putin might have to sell his Super Bowl ring.
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You are correct in the first instance–the loss would be borne by the fossil fuel industries. But there are many people who have invested in those companies (I am sure some of my TIAA-CREF pension is invested in some of those companies) and there are many who hold the corporate bonds of those companies. Those people would suffer losses as well. In addition, many people have invested in the sovereign wealth funds of the oil-producing countries which would presumably suffer as well.
The variable which is unknown is how those losses would be leveraged in the overall economy. If the carbon tax were implemented slowly over time, the effects could be handled well. But the long time horizon to make the transition mitigates the effectiveness of the tax in avoiding climate change.
Putin may have to sell his ring anyway–he’s getting fracked to death.
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