A New Debate Over Pricing the Risks of Climate Change

Tabuchi, Hiroko, and Clifford Krauss. “A New Debate Over Pricing the Risks of Climate             Change.” The New York Times, The New York Times, 26 Sept. 2016.

http://www.nytimes.com/2016/09/27/business/energy-environment/a-new-debate-over-pricing-the-risks-of-climate-change.html

            Companies with major environmental impacts, including Exxon, have recently contested that the economics of climate change are unpredictable and they should therefore not be forced to come up with exact figures regarding their impact. Republicans in Congress are attempting to pass legislation to allow companies to not disclose exact figures. Representative Bill Posey contended that the original bill forcing companies to disclose these figures was passed with deceitful intentions: the bill was passed under the guise of protecting investors, when in reality the bill was passed to shame companies for their environmental impact – according to Posey. Posey further argued that the bill leads to a waste of resources for companies, shareholders, and the S.E.C., and therefore impedes potential economic growth. Posey has, however, accepted donations from oil and gas companies, entirely undermining his credibility on the subject. Advocates of fuller corporate disclosure argued that climate change has a significant economic impact, therefore justifying the bill: a peer-reviewed study in the journal Nature revealed that a 2ºC increase in temperature could wipe out $1.7 trillion of financial assets. Therefore, proponents of the bill argue that the S.E.C must consider climate change. The recent discussion on the issue has been prompted by the ratification of the Paris climate agreement, which will lead to an increase in both the magnitude and frequency of measures taken to prevent climate change. A shift in the global energy landscape has brought about concerns about the viability of future coal, oil, and gas projects: scientists estimate that three-quarter’s of the world’s coal, oil, and gas reserves must remain untouched in order to keep carbon emissions within the confines set by the recent Paris accord. These companies’ reluctance to reveal economic impact stems from concerns regarding the volatility and damage that would ensue. Having such precise figures available to shareholders at any given instant would certainly influence their behavior in buying and selling shares, which would obviously damage any company. This is compounded by the genuine difficulty in predicting future asset valuations: it is impossible to predict future regulations and technologies. As it stands, the US oil industry is under significant financial pressure, and any additional regulation would only add to this pressure. This argument is flawed, as Exxon Mobil has recently stress-tested its major assets and expects that future cash flow would sustain regardless of situation. As all industries have some impact on climate change – whether direct or indirect – efforts are being made to set standards for climate change risks across all industries. While some companies have led the way with full disclosure, others have been far more reluctant. It is certainly clear that there are economic benefits and drawbacks to increased disclosure.

            The topics discussed in this article are especially important. Climate change stands as one of the greatest threats facing biodiversity and the world as a whole, and efforts must be made to prevent further damage. Policy improving conditions must be very delicately balanced, however, as all regulation has an economic impact, and economic health is wholly essential to the health of society. The costs and benefits must be weighed of forcing companies to disclose their impact on climate. Forcing one particular industry to disclose figures puts them at a disadvantage against all other industries. Forcing all companies to disclose exact economic figures could potentially lead to a complete lack of faith in the market and manufacture an economic downturn. At the same time, climate change must be stopped by any reasonable means possible. In many cases, an impasse consequently results when attempting to configure both environmental and economic policy. Businessmen, ordinary citizens, and policymakers alike must have a firmer grasp on the relationship between the environment and the economy (and thus the necessity of each policy discussed) in order to avoid these impasses and maintain progress on both fronts. Clearly, the subject of the article is incredibly important.

            Though the article made many strong points, many of its finer points were either poorly written or addressed. The authors fails to address any data when discussing regulatory history and the history of the policy discussed in the article – such an addition surely would have provided far more insight on the topic discussed. Additionally, the article was poorly structured, and the authors seemed to jump between topics with a lack of structure. The authors could have made a far stronger point had their information been more structured and concise. Otherwise, the article was very well written and addressed important points.