US Treasury secretary Steven Mnuchin has often been seen as a moderating influence, even a voice of reason, inside Donald Trump’s administration. The American economy has generally performed well under his stewardship. However, his recent remarks at Davos 2020 ontheeconomics of climate change were outside the mainstream of macroeconomic thinking.
Mr Mnuchin joked that the teenage climate activist Greta Thunberg should study economics at college before recommending that investors divest completely from fossil fuels. He added that the long-term future of the climate is so uncertain that immediate action, including higher carbon pricing, is unnecessary or damaging.
He is optimistic that improvements in climate technology will help to solve the problem and reduce the damage below the levels predicted by what US President Donald Trump calls “prophets of doom”. These assertions are in line with the administration ‘s belief that the US private sector is already doing enough to protect the natural environment.
If Mr Mnuchin intended to imply that thediscipline of economics widely supports his assertions, he is mistaken. Of course, some individual economists will advocate virtually any proposition, but the profession is mostly singing from the same hymn sheet on climate change. An example of this is the statement a year ago from the Climate Leadership Council, a non-partisan collection of American economists and policymakers that includes many of the most respected professionals in the field, including many Republicans. Their opening remarks are unequivocal:
Global climate change is a serious problem calling for immediate national action. Guided by sound economic principles, we are united in the following policy recommendations.A carbon tax offers the most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary. Their call for “immediate national action” contradicts the administration’s (and the Federal Reserve’s) relaxed attitude.
Economists’ concerns have been heightened in the past decade. Early studies of the economic damage from climate change tended to suggest that it would involve a one-off step down in output, far in the future, after which annual growth in gn screenshot product would bounce back to its previous rate.