Growth versus Climate: A Persistently False Dichotomy

Economists have, by and large, failed to anticipate the rapidly escalating climate risk, just as they did not see the 2008 global financial crisis brewing. While economics textbooks analyse spillover harm to society from economic activity, mainstream economic policy advice often ignores environmental care, biodiversity protection, and climate action in its effort to promote economic growth and poverty reduction. Moreover, governments give incentives to boost short-term GDP growth, even when based on high-carbon infrastructure. Damaging to development is the heavy discounting of the future benefits of climate investment—wrongly favoured by some economists—neglecting scientific evidence on the economic losses from irreversible ecological damage. It is vital that science and economics complement each other far more on climatic trends and policy. Economic work does devote space for climate change now, but needed is an integration—by governments, businesses, and the MDBs—of climate effects directly in the assessments of economic growth.