The Economics of Global Warming

The Economics of Global Warming

The Economics of Global Warming

The Economics of Global Warming

Synopsis

This study examines the costs and benefits of an aggressive programme of global action to limit greenhouse warming. An initial chapter summarizes the scientific issues from the standpoint of an economist. The analysis places heavy emphasis on efforts over a long run of 200 to 300 years, with much greater warming and damages than associated with the conventional benchmark (a doubling of carbon dioxide in the atmosphere).

Excerpt

This book derives from the first research project conducted by the Institute for International Economics on an environmental issue. We decided to address global warming both because of its potentially enormous impact on the world economy and because it is the quintessential international economic problem: it transcends national borders, involves irreversible change and the risk of major adverse surprise, confronts policymakers with the need to make decisions in the face of considerable uncertainty, and calls for a coordinated and multifaceted response by a large number of countries. Global warming could prove to be one of the most difficult tests to date of international policy cooperation, and it could have major implications for current international rules and institutional arrangements.

William Cline's analysis begins with a careful evaluation of the science of global warming. He argues that valid policy decisions cannot be made without taking into account the very-long-term implications of the phenomenon over a horizon of three centuries. Because the greenhouse effect is cumulative and irreversible, the logic of the scientific analysis to date points to far greater warming than is generally associated with the problem. The standard benchmark— a doubling of atmospheric carbon dioxide—is expected to occur by the first half of the next century, and there is no reason for global warming to stop at that point. Cline argues that the ultimate damages from warming, and thus the economic stakes, are therefore far larger than currently recognized in the policy debate.

Cline's central finding is that these damages are likely to warrant major efforts to limit warming by drastically curtailing emissions of carbon dioxide and other greenhouse gases. However, he recognizes the sizable costs involved in such efforts. He therefore proposes a two-stage, contingent policy strategy. First, countries would make their best efforts (but without legally binding obligation) to limit further expansion of greenhouse gas emissions including through the adoption of such measures as modest carbon taxes, reduced deforestation and increased afforestation, and systematic pursuit of a whole range of "free" energyefficiency gains. This initial stage would coincide with intense efforts toward further confirmation of greenhouse science. By 2000, the international community would review the scientific analysis; if the current diagnosis is confirmed, it would then be appropriate to adopt an intensified policy regime.

This study, like a number of earlier Institute studies, is being presented in two different forms to meet the needs of different audiences. In early May 1992, we . . .

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