[One Sip of a Book] Climate Crisis Is Soon a Great Shift of Wealth

Editor's NoteSome sentences encapsulate the entire content of a book, while others instantly resonate with readers, creating a connection with the book. We excerpt and introduce such meaningful sentences from books.

Professor Hong Jong-ho, who has devoted himself to climate economics since his twenties, has compiled 40 years of research achievements into one book. Now that the climate crisis has emerged as the foremost issue the entire Earth must solve across all fields including environment, science, and society, the author says that realizing climate issues as the key driver of the economy is the first step to solving humanity’s crisis. Just as the rise in global temperatures increased the survival rate of wild animals, leading to COVID-19 which paralyzed global tourism, dining, aviation, and logistics industries, breaking the chain of economic activities. Facing the difficult but inevitable task of transitioning to a decarbonized nation, he introduces warm yet sharp solutions for a ‘sustainable Korean economy.’

If the social discount rate is set high, it is undesirable to spend huge costs now to prevent future damages caused by climate change. Since benefits are in the distant future but costs are paid immediately, calculating from the present perspective often results in net benefits (benefits minus costs) appearing lower. This allows the argument that investing in areas with certain human and physical capital accumulation, such as education, technology, and social overhead capital, is more desirable for future generations than climate response. On the other hand, a low social discount rate leads to the opposite conclusion. Since the survival and development of future generations are as important as the costs borne by the current generation, active policy efforts to prevent climate change are both imperative and rational. Policies that impose high taxes on carbon emissions or completely phase out processes or facilities using fossil fuels can gain legitimacy. Although investment efficiency may decline immediately and impose financial burdens on companies and the economy, it is a desirable direction for future generations. - Chapter 2, A Baby Born Today, A Baby Born 50 Years Later

Regarding the carbon tax, 3,623 leading economic experts voted in favor regardless of ideology or inclination. Why was that? Because it allows companies to choose the most advantageous way for themselves between minimizing carbon emissions to save taxes or simply paying the tax and emitting carbon. The methods companies can choose to reduce carbon are also diverse. They can reduce production volume itself, apply technology that artificially absorbs carbon, switch to environmentally friendly fuels, or completely change the process. Faced with the constraint of the carbon tax, companies will constantly consider and innovate to find the best way to reduce costs and gain competitive advantage. Isn’t it obvious how companies that passively respond to the carbon tax as a mere cost and those that actively respond to such regulations while striving to find innovative paths will be evaluated differently in the market? - Chapter 4, Can the ‘Right to Pollute’ Be Bought and Sold?

Korea is one of the countries with the largest manufacturing sector among developed countries. Korea’s main manufacturing industries are energy-intensive sectors such as steel, petrochemicals, cement, automobiles, and electronics. All are industries with high carbon risk. For us, bold action toward decarbonization is the only option left. This is Korea’s position in the international community and the current state of the Korean economy. … (omitted) … A paradigm shift in perception is needed that climate policy offers an unparalleled opportunity to raise Korea’s status in the international community, build a sustainable economic structure, and maximize energy efficiency. At the center of this are, of course, the carbon tax and emissions trading system. - Chapter 4, Can the ‘Right to Pollute’ Be Bought and Sold?

The Great Wealth Transformation of the Climate Crisis | Written by Hong Jong-ho | Dasan Books | 332 pages | 20,000 KRW