What will it cost us both individually and collectively to adapt to climate change? Barry wants to know and so do I! The vague answer is that this cost will differ across individuals and that it will fall over time. Consider two people who just graduated from Tulane. Assume that one loves New Orleans while the other is indifferent between living there or in Chicago. If climate change poses sharp risks to New Orleans, then the New Orleans lover will face higher adaptation costs if she must move away. Population migration will be a big part of climate adaptation. Climate change will have different impacts on different geographical locations. Yes, Chicago will face challenges but I am optimistic that capitalist innovation will go a long way to protecting this person from anticipated events such as heat waves. If New Orleans experiences a further brain drain due to climate risks, then the city will have strong incentives to invest to reduce these risks. Every city must continually reinvest as the existing capital stock depreciates. What is the marginal cost increase due to “climate proofing” the city? This is difficult to estimate but we know that this cost will fall over time as cities all over the world experiment and the nerds tinker to devise new ways to protect the populace against the new risks we will face. As the new White House report highlights, we foresee the challenge that lies ahead posed by climate change.
The RBC readers won’t believe it, but I can’t predict the future direction of technological change. I’m not that smart. But, I know that I don’t know even though I know that we face a very real challenge. I also know that many others know this. Like a 12 step program, our collective doubt and uncertainty is our first step in figuring out how to adapt. The benefits of adaptation will exceed the costs. Endogenous innovation is a powerful force. Your Ipad won’t save you from climate change but a future Steve Jobs will allow your grandkids to have a high quality of life. Now for the 99th time, I support $10 gas now. Carbon mitigation now makes adaptation even easier.