William Nordhaus, a prominent economist and the former chair of Boston Federal Reserve Bank, won the most prestigious prize in economics on October 8 for a lifetime of research integrating climate change into long-term macroeconomic analysis.
That the Sveriges Riksbank Prize in Economic Sciences – sometimes known as the Nobel Prize in Economics – would go to Nordhaus may at first seem like an encouraging sign that the scholarly economic community is waking up to the monumental environmental challenges ahead, and is prepared to support those who research how the economy and climate affect each other.
After all, Nordhaus decided to devote his work to this area of research as early as the 1970s, when climate change studies were still in their infancy.
As the awarding committee recognised, his models have allowed us to assess different economic growth paths and their implications for the climate that future generations will inherit.
Carbon taxes and emission quotas are among the practical applications of his model. These can majorly contribute to keeping global warming in check.
As Cesar Purisima, formerly the secretary of finance of the Philippines, told Euromoney last year: “Coal is considered cheap because we don’t tax carbon.