Economics of climate change, innovation win Nobel Prize for U.S. duo

William Nordhaus and Paul Romer win Nobel Economics Prize

By using a tax rather than government edicts to slash emissions, the policy encourages companies to find innovative ways to reduce pollution.

'83) has won the 2018 Nobel Prize in Economics for his work on preserving economic growth, sharing the award with Yale professor William Nordhaus.

Nordhaus, at the University of Yale in New Haven, Connecticut, is the founding father of the study of climate change economics.

Nordhaus also showed how economic activity interacts with chemistry and physics to "produce climate change", the Academy said.

Hours before the award, the United Nations panel on climate change said society would have to radically alter the way it consumes energy, travels and builds to avoid the worst effects of global warming.

Romer teaches economics at New York University, where he founded the Stern Urbanization Project, which researches how policymakers can harness the rapid growth of cities to create economic opportunity and undertake systemic social reform.

U.S. President Donald Trump has repeatedly called climate change a hoax, and a year ago announced that he would withdraw the United States from a global pact to combat it reached in 2015, calling the deal's demands for emissions cuts too costly. "I hope the prize today could help everyone see that humans are capable of awesome accomplishments when we set about trying to do something".

The two will share the $1.01 million prize. The Nobel committee said "Romer's research laid the foundation of what is now called endogenous growth theory".

The applications of the model for the carbon tax has been criticized for several reasons, though.

Romer was the chief economist at the World Bank but left after 15 months following repeated run-ins with staff.

The economics prize wraps up the 2018 Nobel awards season, notable this year for the lack of a literature prize.

Worth $1.31 million Cdn, the economics award that concludes this year's series of Nobel prizes came about seven decades after the others. David Warsh, a blogger who follows economic research and has written a book on Romer's work, said he thought it was no coincidence that the Nobel committee made a decision to honor Nordhaus and Romer at a time of escalating alarm over climate change.

Romer is Rochester's third economics Nobelist. This explains how ideas are different from other physical goods and require certain conditions to thrive in a market. Last year's prize went to an American, Richard Thaler of the University of Chicago, for work on how human irrationality affects economic theory.