The Nobel Prize is the most prestigious honour for research in economics, and there is no more fitting recognition to the global menace manifested by Climate Change. William Nordhaus of Yale University has been awarded the Sveriges Riksbank Prize in Economic Sciences in Honour of Alfred Nobel for his path-breaking work in “integrating climate change into long-run macroeconomic analysis,” in the words of the Nobel committee. But his contributions can be seen more broadly as making a profound contribution towards broadening the scope of economic analysis to shed light on the causes and consequences of how unintended effects of human activity can influence the long-run trajectory of economic growth and well-being. This research agenda has covered resource scarcity, economic accounting incorporating environmental considerations and, most notably, seminal work on the economics of global climate change.

What makes Nordhaus’ contributions all the more notable is the deep influence they have had on policy – something that cannot be said for every Nobel Prize winner. Nordhaus’ research is careful and apolitical, but his work has nevertheless indirectly made its way into the policy world by influencing the thinking of generations of students.

In 2015-2016, concept that Nordhaus had helped develop, such as the social cost of carbon, defined as the present value today of the damages of an additional ton of emissions of carbon dioxide, made its way into many regulatory impact analyses by the US government and is a topic in climate policy discussions around the world.

Nordhaus was prescient – it turns out the world is on track to hit 487 ppm of CO2 in 2030. In two papers – “Can We Control Carbon Dioxide?” in 1975 and “Economic Growth and Climate: The Case of Carbon Dioxide” in 1977 – Nordhaus laid the groundwork for what is now an entire field on the economics of climate change. In these early papers, he began with a classic macroeconomic model of long-run growth. This groundbreaking work was the first to include a representation of carbon dioxide concentrations and the climate in such a macroeconomic framework, and to begin analyzing how climate change can be mitigated at a the lowest-cost possible.

This work was followed up by construction of one of the first, and the most well-known, integrated assessment models of climate change. Models are crucial for understanding the nature of climate change and how to address it because the issue involves physical, chemical and economic relationships that would simply not be possible to grasp fully without a clear framework. Nordhaus’ first integrated assessment model – the Dynamic Integrated model of Climate and the Economy or DICE – provides just such a framework. The UN Intergovernmental Panel on Climate Change and the United States government under the Obama administration are just a few of the bodies around the world that have used DICE in their work to understand potential solutions for addressing climate change.

In 1994 Nordhaus pioneered the estimation of damages from climate change to agriculture. As the climate changes, agricultural yields may decline, reducing the value of land that now serves as cropland and, less common, increasing the value in some cooler climes. Such estimation allows for an empirical strategy to estimate how climate change affects agriculture in the long-run.

With this year's award going to Professor William Nordhaus for his contributions towards expanding the domain of our knowledge to help us someday fully tackle this “the most pressing issue of the day”, we can look forward to a future filled with less sceptics and more enthusiasts to fight climate change.