Research work · 2005
Climate-change Policy: A Survey
Climate Change Policy
Abstract
Abstract Climate change presents a challenge to policy-makers of an altogether different kind to the day-to-day business of intervention in the economy to correct market failures. It is characterized by major and multidimensional uncertainties (in the science, the economics, and the politics), it is an externality created by almost all production and consumption, and it requires international cooperation on an unprecedented scale. Arguably, there is no other economic problem on this scale—save perhaps the related one of population growth. Furthermore, while economic analysis focuses on changes at the margin, many argue that the consequences of climate change may be anything but marginal. Climate change is likely to have a massive impact on biodiversity, it may alter oceanic currents, and it may displace whole populations and significantly reduce the economic prospects of our grandchildren. Unsurprisingly then, the usual economists’ toolbox looks puny against the scale of this challenge, and will require very considerable review and development. There will be no easy read across from existing economic theory and empirical evidence to policy. Just as the experience of the unemployment of the 1930s required a reinvention of much of macroeconomics, climate change will need new thinking, too. Environmental economics is in its infancy.