Dealing with global warming will be expensive. The price tag last year for the drought was about $35 billion, according to the reinsurer Aon Benfield. Hurricane Sandy cost a further $65 billion. The National Oceanic and Atmospheric Administration said that last year ranked as the second-costliest in terms of natural disasters since 1980 — lagging only 2005 when Hurricane Katrina swamped New Orleans.
And yet this is nothing compared with what the future will bring.
“The impact to date has been pretty small,” said William Nordhaus of Yale, one of the leading economists studying the impact of climate change.
Nicholas Stern of the London School of Economics, another expert on the costs of climate change, said: “What we are seeing is on the back of warming of only 0.8 degrees centigrade” since the second half of the 19th century. “What we risk is 4, 5, 6 degrees even by the end of this century.”
For all the damage wrought by Sandy and Katrina, weather disasters in recent years have cost us probably less than a tenth of 1 percent of our economic product. Yet, according to Professor Nordhaus, “Damages will rise more sharply than the temperature curve.”
The president’s speech notwithstanding, the cost of dealing with these looming disasters is not to be found in the budgets discussed by the White House and Congressional Republicans, which would shrink much of the government to its smallest share of the economy since the early 1960s.
Neither is the cost of steering the economy away from the fossil fuels that are to blame for a warming atmosphere. A report from the World Economic Forum estimated that would cost $700 billion a year in public and private investment.
The reluctance is not because we have no idea how to finance these efforts. We do. Top economists agree a tax on fuels and the carbon they spew into the atmosphere would be the cheapest way to combat climate change. [*editor note: see below] Most advanced countries rely on some variant of this tax. The question is whether the prospect of more droughts and more powerful hurricanes will push Americans to embrace it, too.
Among the 34 industrialized nations of the Organization for Economic Cooperation and Development, these taxes average about $68.4 per metric ton of carbon dioxide. The United States, by contrast, has a gas tax to pay for highway improvement, and that’s about it. Total federal taxes on energy amount to $6.30 per ton.
Some states add excise taxes — California has a gas tax equivalent to about $46.50 per ton of carbon dioxide and a $2.33-per-ton tax on jet kerosene. But, according to a review by the O.E.C.D., the federal government is unique in imposing no taxes on other energy use, from residential heating to power generation.
A tax on energy could single-handedly take on climate change. For starters, it would encourage people and businesses to burn less, reducing emissions at a stroke. One study found that a carbon tax of $15 per ton would reduce greenhouse emissions by 14 percent as people sought to save energy by driving less, insulating their homes and switching to renewable fuels, among other things.
What’s more, it would raise lots of money. Estimates reviewed in a report by the Tax Policy Center ranged from 0.6 percent of the nation’s gross domestic product — for a tax of $20 per ton of carbon dioxide — to 1.6 percent of G.D.P. for a tax of $41 per ton. Consider this: 1.6 percent of G.D.P. is $240 billion a year. And $41 per ton amounts to an extra 35 cents a gallon of gas.