The common discourse regarding future environmental harm rests on a comparison between costs incurred now and damages avoided later. That comparison requires converting future money into present money, and the conversion requires a number: the discount rate. It is the single most consequential parameter in climate economics, it is not an empirical quantity in the way that a temperature sensitivity or an emissions factor is, and it is almost never discussed outside the technic

This blog has run two long series that never met each other. One examined the economics of artificial intelligence — investment, productivity, labor displacement, policy. The other has spent the past year on the economics of climate and energy. The place where they collide is the electricity system, and the collision is happening faster than either literature anticipated. After nearly two decades of essentially flat electricity demand in the United States and much of Europe,

When this blog covered the electric vehicle transition across Japan, Korea, China, Germany, and India, the framing was almost entirely demand-side: consumer incentives, charging infrastructure, model availability, manufacturer strategy. That was the right frame for 2023. It is an incomplete one now. The constraint on electrification has been migrating steadily upstream, away from the showroom and toward the mine, and the economics of that upstream look nothing like the econom

The cost story of the last fifteen years is one of the great successes in energy history. Utility-scale solar module costs have fallen by roughly 90 percent since 2010, and in most sunny markets a new solar farm now produces electricity more cheaply than a new gas plant. By the logic of the levelized cost comparisons that dominate energy commentary, the argument should be over. And yet developers in the highest-penetration markets — California, Chile, South Australia, parts o

Insurance is the quiet machinery that makes modern homeownership possible. No insurance means no mortgage; no mortgage means no buyer; no buyer means your home's value exists mostly on paper. That machinery is now grinding against a hard limit: climate risk that can no longer be priced at rates anyone can afford. Major insurers have stopped writing new homeowner policies in parts of California, citing wildfire exposure, while others have retreated from Florida and Louisiana u

Sustainable finance has grown from a niche curiosity into a multi-trillion-dollar market. Green bonds, sustainability-linked loans, ESG funds — the labels multiply, the assets swell, and the marketing brochures promise that your savings are saving the planet. It is one of the most seductive ideas in modern economics: that we can decarbonize the world without sacrifice, simply by redirecting capital flows. But beneath the impressive headline numbers sits an uncomfortable quest

Every serious climate plan now comes wrapped in a promise: the transition will be "just." Workers in fossil fuel industries will be retrained, communities will be reinvested in, and nobody will be left behind. It is a morally necessary promise — coal miners did not cause climate change, and the towns built around extraction did nothing wrong by existing. But promises are cheap, and the economic track record of transition assistance is sobering. If we are honest about what coa

In November 2018, the French government raised its fuel tax as part of a climate agenda, and within weeks the country was on fire — figuratively and occasionally literally. The gilets jaunes, the yellow vest protesters, were not climate deniers. Their grievance was arithmetic: rural and suburban workers who must drive to their jobs were being asked to pay for a global problem largely caused by people wealthier than themselves. Their slogan cut to the bone of climate politics:

The arithmetic of climate finance is stark. Developing countries — home to the majority of the world's population, responsible for a small fraction of historical greenhouse gas emissions, and among the most exposed to climate impacts — need to invest trillions of dollars to simultaneously decarbonize their growing economies and adapt to climate change they did not cause. Estimates from the United Nations and the International Monetary Fund suggest that emerging markets and de

One of the most uncomfortable truths in climate economics is this: the world has already built far more fossil fuel infrastructure than it can safely use if it wants to stay within reasonable temperature targets. Power plants, pipelines, refineries, and coal mines represent trillions of dollars in capital investment, much of it expected to operate for decades to come. The carbon locked into the "committed emissions" of existing infrastructure — if run to its natural end of li

The circular economy has become one of the most fashionable concepts in sustainability discourse — a vision of industrial systems that eliminate waste by keeping materials in use indefinitely, cycling nutrients back into the biosphere and products back into the economy. Proponents argue it offers a path to decouple economic growth from resource consumption, generating environmental benefits while simultaneously unlocking trillions in economic value. But enthusiasm for the con

As countries race to decarbonize their economies, a new policy instrument has emerged at the intersection of climate ambition and global trade: the Carbon Border Adjustment Mechanism, or CBAM. At its core, a CBAM places a carbon price on imports coming from countries with weaker or no carbon pricing rules, ensuring that foreign producers cannot gain a competitive edge simply by ignoring emissions. The European Union launched the world's first major CBAM in 2023, targeting car

When economists and policymakers discuss the costs of climate change, they tend to focus on the direct physical damages: the value of property destroyed by storms, the agricultural output lost to drought, the infrastructure damaged by rising seas. These are real and measurable costs, and they are already substantial. But they represent only a fraction of the full economic reckoning that climate change is beginning to trigger. The movement of people — the displacement of commu

At the heart of contemporary environmental economics lies a dispute that is as much philosophical as it is empirical: can economic growth be decoupled from ecological destruction, or must we fundamentally rethink our addiction to growth itself? On one side stand the green growth optimists, who argue that technological innovation, renewable energy, and smart regulation can allow economies to keep expanding while dramatically reducing their environmental footprint. On the other

For most of human history, the services that nature provides have been treated by economists as free goods — externalities too diffuse, too complex, or simply too taken for granted to appear in any ledger. Clean water filtered through wetlands, crops pollinated by wild insects, coastlines protected by coral reefs, carbon absorbed by forests: none of these services carry a price tag in conventional economic accounting. The assumption, rarely articulated but deeply embedded in

The idea sounds almost elegant in its simplicity: if pollution is a cost that falls on society rather than on the businesses that produce it, then make those businesses pay for it. Carbon pricing — whether through taxes or tradeable emissions permits — is the economic profession's most widely endorsed tool for driving down greenhouse gas emissions. And yet, decades after the first carbon markets launched, global emissions continue to rise. The gap between the theory and the r

The paradox of AI's creative destruction isn't just an economic puzzle—it's a governance challenge that will define the next decade. History offers a cautionary tale here. The Industrial Revolution eventually lifted living standards dramatically, but the transition period was marked by social upheaval, urban poverty, child labor, and political instability that lasted generations. We have the knowledge and policy tools to avoid repeating those mistakes, but only if we recogniz

In the Austrian economist Joseph Schumpeter's theory of economic evolution, innovation doesn't simply improve existing systems—it fundamentally destroys them to make way for something new. He called this process "creative destruction," and it's the engine that has driven capitalism forward for centuries. From the steam engine to the personal computer, each wave of technological innovation has eliminated entire categories of work while creating entirely new industries and occu

What would an economy designed for long-term flourishing actually look like? Not in some distant utopian future, but as a practical system we could build in the coming decades. Start with the fundamentals. Economic activity would operate within ecological boundaries—respecting the limits of what Earth's systems can sustainably provide and absorb. This doesn't mean zero growth, but it means redefining growth. Instead of maximizing material throughput, we'd optimize for human w

Every major economic transformation has been powered by innovation—new technologies, new business models, new ways of organizing production. The transition to sustainability is no different. It's happening faster than many expected, driven by falling costs, rising performance, and growing investment. The most visible example is energy. Solar panel costs have fallen over 90 percent in the past decade. Wind power is competitive with fossil fuels across much of the world. Batter