Give weight to future generations in every cost-benefit exercise. Nonhuman animals discount future rewards much more than human beings do. But humans who lack understanding of issues also tend to heavily discount the future. In particular, the long lag between a climate mitigation decision and the impacts of that decision may hinder optimal investment in climate change mitigation: it makes the impacts less salient. One way to offset this lack of understanding is to place weight explicitly on the utility for future generations in every cost-benefit analysis underpinning government, corporate, or private actions. Several countries, such as Bhutan, do this already as part of their policy frameworks. This approach could be adopted for a broader set of issues—including by encouraging greater representation of younger people in political life and by building policy institutions that focus on long-term issues, such as intergenerational inequality (that lasts beyond the electoral cycle).
Innovation cooperation may be easier to achieve than cooperation on other climate-related issues. The experience of COVID-19 demonstrates that global innovation can be scaled up significantly when needed—including through unprecedented collaboration across multiple actors from around the world. Before COVID-19, the fastest vaccine development took four years (for mumps). Yet by the end of 2020 several COVID-19 vaccines had proved highly effective, reflecting massive research and development. However, it is taking far longer for the world to cooperate to produce and distribute vaccines equitably. And although the case for higher carbon taxes to fight climate change is persuasive, it has proved politically difficult to implement in many countries. At the same time, the recent shift toward renewable energy is largely because of rapid technological advances that have driven down the cost of renewable energy. If our species’ ability to cooperate and tackle climate change has evolved slower than our capacity to harm the planet, then we may need to make it easier for self-regarding humans to make climate-friendly choices by accelerating clean energy innovation. This would increase the private benefit of switching to cleaner energy absent strong public action.
A centralized global market to hedge climate risks is needed to maximize risk sharing and promote cross-country cooperation. Despite our best efforts to mitigate climate change, it is very likely there will be residual risk requiring adaptation measures. One way to adapt is to share risk to limit the harm to individual actors. Food sharing between chimpanzees works well when there is idiosyncratic risk (there may be enough food for the whole group regardless of which chimpanzee has been successful in the hunt on any given day). Similarly, insurance markets among humans work well in hedging idiosyncratic risks such as car accidents, health shocks, and mortality. However, when a risk is correlated among actors (such as property in danger from natural disasters), it can appear to be “aggregate risk” and can be insured only by a global market. From this perspective, a successful market to share climate risks would benefit from a single global platform, which maximizes coincidence of needs. It is important for the centralized global platform to bring together entities from different parts of the world that will experience the impact of climate change differently or at different times (in a less correlated way).
Action on climate risk sharing is needed now—before the uncertainty about cross-country distribution of climate change impact is resolved. Vampire bats need to feed often to survive; if one misses a feeding three nights in a row, it could starve to death. To cope with this risk, they have developed a system of trade, with well-fed bats regurgitating blood directly into the mouths of hungry and unrelated peers. Moreover, the bats keep track of who has helped them in the past and share primarily with those bats. It is the uncertainty about whether a bat may go hungry tomorrow that incentivizes it to share with other bats today. Similarly, for markets to play a greater role in hedging the biggest climate change risks, they must act before uncertainty about the cross-country impact of climate change is resolved. After the risk has materialized, the problem becomes burden sharing not risk sharing. That is, if it becomes clearer that relatively poor countries (for example, those in the tropics) will suffer most from climate change in the future there may be few incentives for richer countries to enter into risk-sharing agreements with them.
Invest in information and imagination. Markets are not likely to take action to share risks if people have limited information about what the risks are. In India, for example, a large proportion of the population lives in areas where average annual pollution levels as measured by PM2.5—particles smaller than approximately 2.5 microns—are several times higher than the level considered safe by the World Health Organization. Yet most of these people are not aware of these risks, as India has too few continuous air monitoring stations. Similarly, if socioeconomic feedback loops are better understood (for instance, the potential impact of climate refugees coming to high-income countries), the problem of climate change leading to flooding of low-lying areas in the tropics may be seen as more of a global problem. Therefore, greater environmental disclosures in better information and imagination to study feedback loops that may occur far in the future can help make the problem of global climate change more compelling to key actors and spur action today. After all, it might be our ability to imagine and our urge to connect with others that truly separates us from other species.
