Offsetting greenhouse gas emissions could soon prove lucrative to farmers, Reuters reported. A new bill would have the USDA create a program that incentivizes combating climate change for farmers. The specter of climate change affects the global economy.
According to Reuters, the Growing Climate Solutions Act—the surprisingly cooperatively produced bill introduced last week in Congress—rewards farms and farmers who go a little greener than they currently are. “U.S. senators on Thursday introduced a bipartisan bill that would direct the Agricultural Department to help farmers, ranchers, and landowners use carbon dioxide-absorbing practices to generate carbon credits, a rare collaboration on climate change,” the article said.
“The proposed Growing Climate Solutions Act directs the USDA to create a program that would help the agriculture sector gain access to revenue from greenhouse gas offset credit markets. Landowners and farmers can generate credits and earn money for activities ranging from reforestation to sequestering carbon in soil to capturing methane from livestock.”
The bill is another example of how climate change affects the global economy.
Money Grows on Trees
Besides devastating plant and animal life, climate change also costs money.
“The costs of global warming rise over time as the extent of warming increases,” said Professor Timothy Taylor, managing editor of Journal of Economic Perspectives. “For example, one projection found that the costs of global warming would be something like one percent of world [gross domestic product (GDP)] by 2050, and then up to about three percent of world GDP by 2100, but then rising to 13 percent of world GDP by 2200 as the warming continued over time.”
Professor Taylor added that the reason the cost seems so small is because as the world experiences increasing average temperatures, some of the devastation that would happen in warmer countries would be partially offset by the more livable conditions in colder countries.
“When there’s a risk of something bad happening, the standard economic response is to think about whether it’s possible to buy insurance, and, in fact, policies about global warming are a kind of insurance,” Professor Taylor said. “Just as you pay for insurance on your home or your car, and you hope the bad thing doesn’t happen or isn’t as bad as you fear, we need to think about what kind of insurance it makes sense to buy for global warming in a public policy sense.”
Now and Later
Determining the costs and benefits of preparing for climate change’s effect on the global economy requires a very long view—one that requires adjusting our eyes beyond the scope of a single lifetime.
“The costs of dealing with climate change are incurred relatively close to the present,” Professor Taylor said. “The benefits are much further off in the future—in fact, the benefits might be hundreds of years into the future. One prominent report that came out in 2006, by a very eminent British economist named Nicholas Stern, estimated that climate change would reduce world GDP by an average of one percent per year over the next century, but the total loss over time would be equal to 14 percent of world GDP.”
This is because Stern estimated that a significant portion of costs to the global economy from climate change would happen after the year 2800. Professor Taylor then asked if it’s worth it to take measures now that may not pay off for eight centuries.
“I would argue, in common with most economists, that while you definitely want to count benefits in the future, the further off the benefits are in the future, the less you want to count them,” he said. “In other words, benefits that arrive next year or in a decade should be counted as worth more than benefits that arrive several centuries off in the future.”
However, that debate isn’t only being had among economists. Every person has their own opinions on climate change costs and benefits, leading to often divisive discussion.
Professor Timothy Taylor contributed to this article. Professor Taylor is managing editor of the prominent Journal of Economic Perspectives, published by the American Economic Association. He earned his Master’s degree in Economics from Stanford University.