Heat domes are a red-hot warning on climate costs

The unprecedented heat wave that recently gripped the Pacific Northwest demonstrates a crucial fact about climate change that most people don't seem to appreciate yet: This will not be a smooth, predictable event. In addition to new costs that can be anticipated, climate change creates enormous risks that may result in a far higher price tag to the global economy, which greatly increases the urgency of eliminating greenhouse emissions as quickly as possible.

A meteorological event known as a "heat dome" sent the temperature at Portland International Airport in Oregon soaring to a record 116°F (46.7°C) this week. Climate change is almost certainly involved, but it isn't as simple as average temperatures rising; scientists also believe that a warming climate can shift existing atmospheric patterns in ways that make extreme heat waves like this more likely. Heat brings with it a host of other risks. Wildfires, of the kind that blasted both Portland and the entire state of California last year, are more likely now in part because of climate change drying out vegetation. Droughts are also intensifying, which threatens crops. The net effect might be to make parts of the Western U.S. unlivable -- or at least, far less attractive as destinations for workers and capital investment. If it happens, that would incur a huge economic cost. Nor is the West Coast the only area threatened by the chaos of an altered climate — river areas are in danger of flooding, any region could theoretically dry out or swelter, and disruptions to agriculture can reverberate in markets throughout the world.

As the temperature in Canada has reached unbearably high levels due to the ongoing heatwave, a German Pincer was captured on camera cooling off in a fountain. Credit: Reuters

It's important to realize that events like this were not what people generally talked about in previous decades when they envisioned the costs of climate change. The talk was mostly of a gradual sea level rise as the polar ice caps melted — a terrible problem for our grandchildren, but something we wouldn't have to live to see. Climate scientists knew, of course, that all kinds of environmental chaos might result from a warming world; they just didn't know exactly what would happen, so they weren't able to make definite enough predictions to capture the public imagination. And so the punditry focused on slowly rising oceans, and talked less about fires, droughts, inland floods, storms, crop failures, diseases, and other potential dangers.

Given the magnitude and uncertainty of the risks involved, we have to treat greenhouse emissions as something to be eliminated, rather than something to be managed. This requires stern policies such as President Joe Biden's proposed clean electricity standard, which would aim to achieve 100% carbon-free electricity by 2035.

In the economics profession, a similar process was playing out. Top climate economists modeled the costs they knew about and could measure, and consigned discussion of the scarier risks to overlooked paragraphs buried deep within their papers. Their calculations for the "social cost of carbon" — a figure that is supposed to reflect the proper size of a hypothetical carbon tax — were typically severe underestimates, even using their own preferred methods. When you add in unpredictable risks to whole regions of the globe, the cost is far larger still. Martin Weitzman, one of the few economists who warned that these risks were being ignored, was snubbed for the Nobel Prize.

Now those risks, and their economic implications, are making themselves apparent. If all the world was facing was the erosion of its coastlines, it would be damaging but not catastrophic; as sea levels rose, real estate development could retreat inward to dry land. But when the danger is unknown, it's harder to plan for it. In which traditionally colder areas, for instance, should consumers now start installing air conditioning? How should crops be changed, and which ones should be engineered to survive droughts? Which states need to intensify their forest management in order to reduce the incidence of wildfires? And so on. The mere fact that we don't know the answers to these questions is itself a cost, because humans are generally risk-averse. Furthermore, the true cost of global warming should include weather problems that we haven't even thought about yet — "unknown unknowns," in the parlance of the late Donald Rumsfeld.

What all this means is that responding to climate change with the modest steps advocated for by top climate economists — such as a $50-per-ton carbon tax — is utterly inadequate. Given the magnitude and uncertainty of the risks involved, we have to treat greenhouse emissions as something to be eliminated, rather than something to be managed. This requires stern policies such as President Joe Biden's proposed clean electricity standard, which would aim to achieve 100% carbon-free electricity by 2035. It also calls for policies to help and pressure other countries to reduce emissions as well, given that the U.S. now represents a modest and shrinking part of the global total.

The alternative — to avoid the strongest measures and hope that our grandchildren find some way to adapt to the changes we wreak on our world — is untenable. It's not our grandchildren that are going to be the first ones to take the brunt of climate chaos, it's us, right now. Our time to dither and delay is now up.

Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.

Disclaimer: This article first appeared on Bloomberg, and is published by special syndication arrangement.