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Executive Summary

What's Fair? Consumers and Climate Change

April 2000
By Ansje Miller, Gautam Sethi, and Gary Wolff

"What's Fair? Consumers and Climate Change" explores ways to help consumers cope both with the impacts of climate change and with the impacts of policies that are aimed at slowing or reversing climate change. The paper makes three points useful to anyone interested in protecting consumers.

Climate change itself will have significant impacts on U.S. consumers. Several studies have suggested that climate change policy will impose financial burdens on consumers, but none of them have compared the impacts of unabated climate change to the impacts of climate change policy. With or without policy efforts to limit it, climate change will affect the health, social, and financial conditions of most Americans. Consumers need a more full comparison and understanding of who is affected before they take a position in favor of or against some particular climate change policy proposal.

Some Americans will feel the changes more than others. Different impacts will be felt by different groups, but the groups that face the greatest impacts overall are those in urban and rural areas, far southern and northern areas, and coastal regions, as well as the youngest and oldest of us, and those with a low income. It is important for us to understand not just the overall effects of climate change, but also how factors such as location, age and financial resources will increase one's vulnerability to climate change.

Several studies have suggested that climate change policy will impose financial burdens on consumers, but none of them compared the impacts of unabated climate change to the impacts of climate change policy. With or without policy efforts to limit it, climate change will affect the health, social, and financial conditions of most Americans.

The most fair and effective compensation or transition programs will help consumers adapt both to climate change and to changes created by policies to control climate change. Much of the policy analysis to date says, "We estimate that consumer X will suffer damage of Y dollars." The implied policy response is to either pay consumer X that number of dollars, or not pay her if she is deemed able to bear the burden of losing Y dollars. But the key response to change of any type is adaptation. Those who are wealthier, healthier, and more mobile, in general, have more opportunities to adapt. When all is said and done, they will bear less of the burden of climate change or climate change policies. By adapting, people reduce the total burden of climate change or climate change policies.

The most fair and effective compensation or transition programs will help consumers adapt both to climate change and to changes created by policies to control climate change.

This is why policies that help people to adapt are economically and morally superior to those that merely help people after they are hurt. The authors provide five examples of adaptation policies in the final section of the paper. For example, one can weatherize homes to offset climate change induced increases in heating and cooling bills, live with a hotter or colder indoor temperature, or pay the increased utility bills. Government weatherization and payment assistance programs for low- and fixed-income consumers already exist. But expansion of the weatherization program would be a superior policy response t0 increased government energy-bill assistance. Weatherization helps homeowners use less energy more efficiently, so they are reducing their energy bill while also reducing their contribution to climate change and other pollution.

Similarly, consumers can adjust to increased transportation costs by purchasing more energy efficient automobiles, by working closer to home or closer to public transit centers, by using alternate transportation, or by just paying more for gasoline. But policies that make it easier for those who own cars to have energy efficient ones, or for people to live close to public transit centers or their place of work, are superior policy responses. Adaptation policies - like the Federal Emergency Management Agency (FEMA) program to permanently relocate families living within flood plains - reduce the total damage to individuals and society now and in the future.

Compensation policies, on the other hand, only help people after they have been hurt. Moreover, they create perverse incentives, such as encouraging people to repeat past mistakes, because they know that the government will always provide bailouts. This paper argues that policies that create an equal capacity to adapt to a constantly changing global ecosystem and economy are good for our society overall, just as equality of economic opportunity is good for our society. The authors hope that this paper will stimulate others to investigate the many adaptation policy opportunities that exist for adaptive policies.

Note: Executive Summary prepared by Ansje Miller and Gary Wolff.

Download What's Fair?: Consumers and Climate Change (67 pp. / 292 kb)