The Challenge

Part 1 of New Paradigm Knowledge Base: Greening Prosperity


Leider ist der Eintrag nur auf Amerikanisches Englisch verfügbar.

Read Part 2: Greening Prosperity: What went wrong?

Read Part 3: Greening Prosperity: New Economy in Progress

Despite a recent political revival of forces questioning the science of serious climate change, there is an almost universal consensus among climate scientists around the world that the earth’s temperature has warmed significantly since the pre-industrial age, and that human activities are the primary cause (Anderegg et al., 2010). Scientists agree that human-made climate change is primarily due to greenhouse gas emissions, chiefly carbon dioxide, and that continuing emissions will have far-reaching effects on our environment.

In December 2015, representatives from 195 countries signed the Paris climate agreement. Signatories committed to  keeping temperatures from rising by more than 1.5 degrees from current levels or to no more than  2 degrees above pre-industrial levels. Meanwhile, a report commissioned by the UN after the Paris agreement and published in 2019 claimed that climate change is already having dramatic effects: Global warming is killing life in the oceans, magnifying weather shocks, and melting the Arctic ice sheets at record speed. The report of the Intergovernmental Panel on Climate Change (IPCC, 2019) argues that if current emissions trends remain unchecked, we could face uncontrolled climate change. If we do not reduce our emissions, the report says, temperatures will continue to increase at the current rate

If this is true, the social and economic consequences of climate change will be dramatic. These effects will come in the form of coastal flooding and fresh-water scarcity, and they will almost certainly lead to some displacement and conflict. This in turn might lead to more intra-country and inter-country migration (Black et al., 2011). In the US, it has been projected that a sea-level rise of 0.9m by 2100 could put the housing of 4.2 million people at risk of flooding (Hauer et al., 2016). In Africa, increasing droughts, desertification, land degradation, failing water supplies and deforestation may raise tensions and trigger conflicts. Indeed, climate change could become a major security threat for the region (Brown et al, 2007).

There seems to be broad agreement among citizens in North America and Europe that combating the  climate crisis requires economic policy needs to focus on restructuring our economic systems. Yet, it has become clear that these attempts may themselves produce major societal and distributional challenges. The yellow vests movement in France shocked many climate experts and made it clear to policy makers that reducting emissions by increasing carbon taxes will require compensation for particular groups within society. Politicians face a major challenge in deciding how to distribute these costs. A similar debate arose in response to the climate package passed by the German parliament in October 2019. Because a price on carbon emissions from car use would hit commuters particularly hard, the government agreed to increase the existing commuter allowance. However, this risk undermining the effectiveness of carbon pricing and disproportionately benefit people with higher incomes.

Overall, support for climate action crucially depends on the acceptance of higher costs for emitting carbon dioxide. The challenge will be to fight climate change without compromising prosperity.


Continue onto Part 2: Greening Prosperity: What went wrong?


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  • Black, R., Bennett, S. R., Thomas, S. M., & Beddington, J. R. (2011). Climate change: Migration as adaptation. Nature, 478(7370), 447.
  • Sachverständigenrat (2014). Mehr Vertrauen in Marktprozesse. Jahresgutachten 2014/15 (Nr. 2014/15). Jahresgutachten.
  • Brown, O., Hammill, A., & McLeman, R. (2007). Climate change as the ‘new’ security threat: Implications for Africa. International affairs, 83(6), 1141-54.
  • Coase, R. H. (1960). The problem of social cost. In Classic papers in natural resource economics. Palgrave Macmillan, London, 87-137.
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  • Sachverständigenrat (2019). Aufbruch zu einer neuen Klimapolitik. Sondergutachten des Sachverständigenrates zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
  • Hauer, M. E., Evans, J. M., & Mishra, D. R. (2016). Millions projected to be at risk from sea-level rise in the continental United States. Nature Climate Change, 6(7), 691.
  • IPCC (2019). Summary for Policymakers. In: IPCC Special Report on the Ocean and Cryosphere in a Changing Climate [H.-O. Pörtner, D.C.Roberts, V. Masson-Delmotte, P. Zhai, M. Tignor, E. Poloczanska, K. Mintenbeck, M. Nicolai, A. Okem, J. Petzold, B. Rama, N. Weyer (eds.)]. In press.
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  • Kollenberg, S., Taschini, L. (2015). The European Union Emissions Trading System and the Market Stability Reserve: Optimal Dynamic Supply Adjustment, CESifo Working Paper 5380.
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