The Surprising Power of Climate Prediction Markets

Climate change remains a low priority for Americans. According to a survey from Pew Research, it ranks 17th out of 21 national issues, trailing behind terrorism, crime, and education.

While this is in part due to the fact that individuals tend to form their climate opinions based on political affiliations, it is also a consequence of how the human brain works.

We have evolved to consider short-term consequences at small scales, making it hard for people to think about the future, imagine catastrophic outcomes, or understand cause-effect relationships that are complex—the recycling of a bottle of water today and its impact on the magnitude of a tsunami in the future, for example. This brain challenge extends to other domains, such as the difficulty some individuals face in saving for retirement or making lifestyle choices that promote their long-term health.

What would it take to shift someone’s perspective on climate change? Research from Columbia Business School offers a surprising answer: placing bets.

In a study published in Nature Climate Change, researchers found that participating in a climate prediction market, where individuals place bets on future climate events, can shift attitudes, increase knowledge, and boost support for climate policies. The mechanism is simple but powerful: When people put money on the line, they become more engaged with reality. And in the case of climate change, that engagement can lead to a shift in perspective.

Betting on the Future

The study was led by Sandra Matz, Lulu Chow Wang Associate Professor of Business, and Academic Director in Executive Education Moran Cerf, a neuroscientist by training, alongside Northwestern University’s Malcolm MacIver. With funding from the Tamer Institute for Social Enterprise and Climate Change, the team conducted two studies involving more than 1,000 participants, each of whom was given $20 and invited to join one of two online prediction markets: one focused on cli- mate events and another on unrelated topics, such as sports or entertainment.

Over the course of four weeks, the climate group placed bets on future real-world outcomes, such as whether July would be the hottest month in a decade or if CO2 levels would surpass a specific threshold. These were not hypothetical wagers. If participants predicted correctly, they made money. If they were wrong, they lost.

Prediction markets push participants to think critically and independently about their decisions, Professor Sandra Matz rather than echoing the views of their political or social circles. Participants are financially motivated to analyze data and make informed estimates. In the study, participants actively explored climate science, past weather patterns, and forecasts. The structure encouraged learning and rewarded accuracy. It also provided participants with constant feedback (winning or losing money) on the accuracy of their past predictions. Finally, the process made the subject of climate change more engaging, offering a mix of curiosity, competition, and real-world relevance.

“People seem to change their views more when the process is gamified, and when they have to put their money where their mouth is,” says Cerf.

Why Climate Change Is Hard to Grasp

Climate change is a perfect example of how our cognitive biases can hinder our comprehension, according to Cerf. The human brain is challenged by nearly every aspect of the issue. “It involves long-term consequences, but the sacrifices you have to make are immediate. The efforts you make may primarily benefit others. And it is hard to even grasp the magnitude of the impacts. You may not notice the insects that go extinct, or the disaster you prevented, so it is easy to ignore those,” he says. “You have to walk a few more steps to the recycling bin, but throwing the paper there doesn’t immediately make the tornado a little smaller. So your brain tends to discount those cause-effect relationships.”

People also tend to conform to the beliefs of those around them, even if those beliefs are false. In communities where skepticism about climate change is prevalent, social cohesion often takes precedence over scientific truth. That creates a problem for traditional approaches, such as education campaigns or fact-based public service ads.

When you try to tell someone they’re wrong—especially on politicized issues—it can backfire, according to Cerf. “Further, people don’t like to think of the future when they have a lot on their plate in the here and now. Prediction markets allow them to profit earlier from things trending in the right direction,” Cerf adds. “I often quote Groucho Marx to our students in this context. He said, ‘Why should I care about future generations? What did a future generation ever do for me?’ This joke by Marx is actually, sadly, manifested by our behavior daily.”

"If we can teach people how to see the world from other perspectives, we can actually solve the bigger problem, which is how to bring the world together."

• Moran Cerf

Measurable Shifts in Attitudes

Before and after the betting period, participants completed surveys about their views on climate change. The results were clear: Those whose bet outcomes proved more accurate exhibited a measurable increase in concern about climate change, greater support for mitigation policies, and a more comprehensive understanding of climate science.

Importantly, these effects held across the political spectrum. The researchers saw shifts in people regardless of where they started, showing that belief change is not limited to one side of the aisle.

The researchers argue that prediction markets succeed because they bypass the usual psychological defenses. Unlike public debates or educational messaging, markets don’t confront people or challenge their identity. Instead, they invite participation on neutral ground: the shared desire to be right—and to profit from it.

A Tool for Policymakers and Investors

Beyond individual belief change, the researchers see prediction markets as a tool for policymakers and governments. Because these markets aggregate diverse viewpoints and reward accuracy, they can provide more reliable forecasts than polls or focus groups. For example, a government agency could use them to test public expectations for climate events or gauge likely reactions to new policies.

They could also become a vehicle for climate investment.

In a system where private capital flows toward climate outcomes, investors could back the scenarios they believe are most likely, and any gains could help fund mitigation or adaptation efforts. 

There’s also the possibility of “ethical arbitrage,” meaning if someone profits from correctly predict- ing a climate disaster, those funds could be used to help prevent it. And if climate change turns out to be less severe than expected, the financial loss is minimal compared to the upside of a safer world.

The next challenge is scale. The study ran with relatively small sums of money in a controlled setting. Cerf and the team have already spoken with government agencies, such as the CFTC, and some leading prediction market sites, and are exploring ways to build a regulated, large-scale climate prediction market—one that allows real financial stakes and global participation.

The idea is not just to change individual minds. It is to create an ecosystem where truth matters and where bets force people to engage with evidence, not rhetoric. And for Cerf, as a neuroscientist, the core interest remains the same: How does belief change happen? At what moment does someone see the world differently?

“If we can teach people how to see the world from other perspectives, we can actually solve the bigger problem, which is how to bring the world together,” says Cerf.

Prediction markets won’t solve climate change alone. But they offer something rare: a way to bring facts, incentives, and curiosity together. And for a world struggling to act on the biggest challenge of our time, that might be a bet worth placing.

Adapted from the paper “Participating in a climate futures market increases support for costly climate policies.”