Business School Economist Studies How Human Activity Affects the Environment
Now the Donald C. Waite Professor of Social Enterprise and a professor of economics and finance at Columbia Business School, he is a leader in the field of environmental economics, which he says is simply the study of how human societies interact with the natural world. His latest book, Endangered Economies, How the Neglect of Nature Threatens Our Prosperity, was published in December by Columbia University Press.
“Climate change has the potential to massively disrupt the ways in which we live our lives,” he says.
Most of Greenland Ice Melted to Bedrock in Recent Geologic Past, Study Says, Lamont-Doherty Earth Observatory, Dec 7, 2016
A native of Wales, Heal earned his bachelor’s and Ph.D. degrees at Cambridge University in the U.K. and came to Columbia in 1983. He also is a research scholar at Columbia’s Earth Institute and a professor at the School of International and Public Affairs. In 2004, he and two business school students founded the Coalition for Rainforest Nations, which since then has raised nearly $4 billion to preserve tropical rainforests. The former students now run the organization full time and Heal is chairman of the board.
He also is on the board of the Union of Concerned Scientists, whose nearly 18,000 members work to fight climate change, and served on the Science Advisory Board of the U.S. Environmental Protection Agency. He was a member of the Pew Oceans Commission, which produced a 2003 report spelling out the dangers to marine ecosystems and made policy recommendations to mitigate them. He is a member of the National Academy of Sciences.
Q. How does one convince climate change skeptics about the need to protect the environment?
A. The best way is to talk about the economics. People respond to dollar figures. Even people who don’t have any emotional link to the environment can be persuaded if you tell them that investing in environmental conservation actually gives a very good rate of return. For every dollar you spend on preventing climate change you probably save in the long run five or six dollars. Numbers of that sort are fairly compelling.
- Donald C. Waite III Professor of Social Enterprise and Professor of Economics and Finance, Graduate School of Business
- Professor, School of International and Public Affairs
- Professor, School of International and Public Affairs, 2002- present
- Professor of Economics, Columbia Business School, 1983-present
- Professor of Economics, University of Sussex, 1973-80
- University Assistant Lecturer in Economics, Cambridge University, 1969-73
- Ph.D. in Economics, Cambridge University, 1969
Q. What’s behind those numbers?
A. Renewable energy is now very competitive with fossil fuels. In the southern U.S., for example, it’s now cheaper to produce power from solar than from natural gas, which is the usual fuel. In the Midwest, wind farms produce electricity more cheaply than coal-fired power stations. Now to put up a new power station most people wouldn’t build coal or gas. It’s just more expensive. Here in the U.S. solar power can produce electricity for about four cents a kilowatt hour, gas about six cents a kilowatt hour, wind about three and a half to four cents a kilowatt hour, coal about seven cents a kilowatt hour, nuclear ten cents a kilowatt hour. We need to hasten the replacement of existing coal and gas by renewable energy. It’s relatively inexpensive to prevent climate change, and climate change itself will be costly.
Q. What is the economic impact of the melting polar icecap or the melting of ice sheets in Greenland?
A. It’s huge. A surprising amount of our infrastructure is at or close to sea level and is very expensive to replace. I’m not a climate scientist but my sense of the literature is that all the ice sheets, the Greenland ice sheet and the Arctic ice sheet, are melting much faster than anticipated. Sea levels are expected to rise anywhere from six to fifteen feet by the end of the century. Half of the U.S. population lives in the coastal counties. The amount of land affected will be small as a fraction of the total land area, but the number of people affected will be much larger. You’d have to move the airports, you’d have to move I-95, you’d have to move the Amtrak lines down the coast, and you’d have to move millions of homes. There’s enough water in all of the ice sheets in Greenland and the Arctic to raise sea level 217 feet worldwide, which would submerge large parts of the world’s population, but that won’t happen for several hundred years.
Q. What would happen here in New York City, for example?
A. Our two major airports, Kennedy and LaGuardia, are essentially at sea level. It’s possible that by the middle of the century they will be flooded regularly and by the end of the century they’ll be unusable. The Port Authority just decided to put $4 billion into renovating LaGuardia. I don’t think they realize that they’re putting $4 billion into something that probably won’t be useful that much longer. Relocating those airports would be a challenge; each takes hundreds of thousands of acres. The housing near them would probably be unusable, too, so tens of thousands of homes will need to be relocated. Seafront properties are already suffering from sea level rise. These are all major economic costs.
Related: Four Economic Errors that Cause Environmental Problems (and How to Correct Them), Union of Concerned Scientists, Dec 21, 2016
Q. Are there market-based incentives to lessen the impact of climate change?
A. Climate change is generated largely, not entirely, by the use of fossil fuels. We need to give people financial incentives to stop using fossil fuels, which means using renewable energy and electric vehicles. We have some incentives of that sort in place at the moment, but we could use more. For example, in the U.S. at the moment there is a federal government subsidy for the purchase of electric vehicles. Some states have additional subsidies, some with requirements that a certain fraction of all energy generated has to be generated from renewable sources. California and New York now both require that within a few years 50 percent of all electricity must come from carbon-free sources. That will prove quite important in developing renewable energy and making it competitive.
Q. What is there to encourage private enterprise, businesses, to engage in environmental stewardship?
A. Private enterprise generally responds to financial incentives. There are fines for polluting, and where there are no fines the EPA has a policy of posting details about polluting firms on its web site. Many companies have been sued for pollution both by the government and by private groups. What’s more, consumers often prefer to deal with companies that have good environmental records, such as Whole Foods or Patagonia. Environmental groups sometimes organize consumer boycotts of companies with poor environmental records. In addition, a growing number of socially responsible investors will invest only in companies with a good environmental record. All this means that most companies have stronger incentives to focus on environmental issues than they did a decade ago.
Q. What are your expectations for the incoming Trump administration?
A. Not enormously high. But interestingly, most of the important environmental policies in the U.S. are state rather than federal. The only significant federal policy was the Obama Clean Power Plan, which would have had a big impact, but has been caught up litigation since it was unveiled in 2015 and hasn’t been implemented. It has been more than 40 years since significant environmental legislation was passed at the federal level. Three big pieces of legislation in the U.S., the Clean Water Act, the Clean Air Act and the Endangered Species Act, were passed during the Nixon Administration, although earlier forms were passed under Johnson and then strengthened considerably. There has been only one positive piece of environmental legislation since then, a modification to the Clean Air Act during the administration of George W. Bush in 1990. The states, on the other hand, have passed a lot of legislation. The federal government should be doing more. Climate change affects every state in the country, that’s a classic federal problem.
Q. Which states are taking the lead on environment efforts?
A. The most active has always been California. When the Clean Air and Clean Water acts were passed in the 1970s, California had its own equivalents in place, and they were stronger than the federal legislation. As a result, California was exempted from the federal legislation and given the right to set its own environmental standards, provided they were at least as high as the federal ones. Every other state in the country was given the choice of following California or following the federal standards. New York, for example, has adopted California standards. California is a key player, that’s why you see the fossil fuel industry, for example, fighting furiously to stop increases in fuel-efficiency requirements for automobiles in California. They know that what California does today, other states may do tomorrow
Q. How can we in New York prepare for what’s coming?
A. The way to start is to make the area less prone to flooding. Since Hurricane Sandy, New York City has been raising the entrances to subways and trying to move equipment out of the basements of low-lying buildings. That is appropriate for a sea level rise of a foot or so. Once sea level rises ten feet, these things are all useless. There’s enough high value property in Manhattan that it may be worth building a seawall around it. A 30-foot wall around Manhattan would keep the ocean out for quite a long time. That would be very expensive. It would probably require a special tax on everybody living or working in Manhattan and it’s not clear that people will want to live behind a 30-foot seawall. Ultimately populations will see that they have to move.
Q. What are some other issues facing the natural world?
A. One is controlling pollution, something that affects human health directly. In the medical profession, in public health, we’re increasingly seeing environmental pollution as a major driver of all sorts of illnesses. Another, which is much less well understood, is that a large number of species are going extinct, which will probably have an impact on the way the natural world functions. Freshwater tends to be much more polluted than seawater, and most freshwater dolphins have gone extinct, although there are still dolphins in the oceans. Pretty much all the major what are called charismatic species —lions, tigers, elephants—are close to extinction. It’s largely due to habitat loss, human populations expanding and taking over the vast areas of land that these big carnivores in particular need to catch their food. There are very, very few of those huge areas of land left.
Q. You’ve been involved with groups in the U.S. and Europe trying to bring biological scientists together with social scientists. How has that gone?
A. Species extinction is a biological problem as much as it is an economic problem. Over the next few decades we’ll be grappling with the spread of tropical diseases into nontropical areas. We’re seeing that already with the Zika virus and dengue fever in the Caribbean, even in Florida. We’ll probably be encountering malaria in that part of the world within the next decade, because warmer weather is now getting to be tropical. That’s a medical problem as well as an economic problem. We need to bring in people from other disciplines to get a sense of how serious these issues are, how easy they can be to deal with, and what the long-term consequences are.