For the first time ever, an economist studying the impacts of climate change has been honored with a Nobel prize.
William Nordhaus, a Yale economist and Paul Romer, the former head of the World Bank, are this year’s recipients of the Nobel prize in economics for their pioneering work on climate change and technological innovation. The two fields are intimately related, as we’ll need to innovate the hell out of our economy and energy system to avoid the worst impacts of climate change. What makes the spotlight on Nordhaus so intriguing is that it comes on the heels of a major new climate report on limiting global warming to 1.5 degree Celsius.
Many of the assumptions in this new report are built on Nordhaus’s work, which began in the 1970s at a time when scientists were coming to grips with just how much human carbon pollution was altering the climate.
But while the physics was clear—greenhouse gases trap heat—the economic impacts were still waiting to be untangled. While the relationship between climate change and economics may seem obvious today, the web of connections and feedbacks wasn’t always well-understood.
What Nordhaus did was basically build a bridge between models of carbon pollution, climate change, and economics. The goal was to look at how climate change affected society and as the Nobel committee put it in its announcement, “closing the loop [of] how the path of economic activity leads to emissions of fossil carbon.”
The model he released in the mid-1990—known as an integrated assessment model—completely changed the way economists and policymakers think about climate change and carbon emissions. Until this point, those emissions were externalities that the world didn’t consider.
Nordhaus’ new model brought emissions into the fold. Today his model is used to consider how high a carbon tax should be, the social cost of carbon, and a slew of other climate policies. Nordhaus has been a big proponent of a carbon tax as a policy vehicle to address carbon pollution, something that’s picked up steam in some quarters but isn’t anywhere close to mainstream in the U.S..
The newly-released climate report on capping global warming at 1.5 degrees Celsius cites Nordhaus’s work frequently. While other economists have argued that some of Nordhaus’ estimates for an optimal carbon tax are way too low, overall, his work is foundational in how we think about climate change, growth and the growing risks it poses to future generations.