Climate Change in 2017: Implications for Business

August 9, 2017
Car driving fast through a city at night.

HBS professors discuss the causes, current impacts, and future consequences of climate change, and the implications for the private sector

Harvard Business School

[The Department of Defense] recognizes the reality of climate change and the significant risk it poses to U.S. interests globally. The National Security Strategy, issued in February 2015, is clear that climate change is an urgent and growing threat to our national security, contributing to increased natural disasters, refugee flows, and conflicts over basic resources such as food and water. These impacts are already occurring, and the scope, scale, and intensity of these impacts are projected to increase over time.

— United States Department of Defense, July 2015

The risk of large-scale climate change is one of the central issues facing the world. There is widespread consensus among the scientific community that the Earth is warming, that this warming is caused by human emissions of greenhouse gases (GHGs), and that the consequences of continued warming are likely to be severe. There is also global concern about the issue: In a recent Pew poll, majorities in all 40 nations polled said that climate change was a serious problem, and a global median of 54% said that it was a very serious problem.

But there is widespread disagreement about what—if anything—should be done in response. While many economists believe that the benefits of reducing global emissions greatly exceed the costs, there is only partial agreement as to what exactly should be done, how quickly it is appropriate to act, and who should pay the costs. Some people, particularly in the U.S., reject the scientific consensus altogether. Others fear that many of the proposed solutions will be expensive and inefficient, or that the free riding problems inherent in reducing emissions—namely, that everyone benefits while particular nations, firms, or individuals must bear the costs—will make it impossible to substantially reduce the risk of significant global climate change.

As a result, the risks of climate change—and the costs and regulatory changes that these risks may drive—are emerging as central issues for the private sector. Some business leaders see climate change as a threat to their firms' viability. Others see opportunity in promoting technologies that will mitigate the risk of climate change by reducing GHG emissions or by helping the world in adapting to its effects. Some are actively lobbying against government action, while others are lobbying for industry, state, and global carbon policies. This note attempts to summarize what is known about the causes, current impacts, and likely future consequences of climate change; to outline the current debate about what should be done; and to explore the implications for the private sector.

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Photo by Mike Wilson on Unsplash