The physics of climate change have been understood for a very long time. The temperature data are unequivocal. The policy implications are fairly clear and are being felt even today. The only remaining questions are the precise amount of the temperature increase in the future and the extent to which human activity is responsible.
Climate change imposes costs, whether central government chooses to acknowledge that or not. They will be borne; the real issue is, by whom? From an economist’s perspective, the correct answer would be by the people who cause climate change, and benefit from it.
The following questions are pertinent:
1. Who benefits from climate change? The most obvious winners are the owners and workers of fossil fuel industries. The fact is, however, that everyone who drives a car or uses electricity also benefits substantially.
2. Who are the parties who will be most affected by climate change? Residents of areas abutting the Atlantic and the Gulf of Mexico, due to increased hurricane activity; farmers; residents of the southwestern states, which may become uninhabitable; and residents of western states with major fire issues.
3. Who currently bears the burdens of climate change? Taxpayers throughout the country pay for most FEMA operations. Individual coastal property owners pay for flood insurance, although the taxpayer picks up some of the tab. Individual property owners also pay for retrofits, sometimes with the help of insurance. Local governments pay to retrofit threatened infrastructure.
With these facts in mind, it is clear that, if nothing changes, individuals living in the specified areas and local governments will wind up bearing most of the costs, although FEMA operations will become more and more expensive over time. GOP dogma notwithstanding, therefore, federal taxpayers will be increasingly burdened with these costs whether they are fully aware of it or not.
If the objective is to allocate costs roughly in proportion to benefits, as it should be, the federal contribution should be larger and more transparent. The obvious way to spread the costs would be through a federal carbon tax.