Lecture 17 (Climate Change: Move to Action (Winter 2008))
Lecture 17 revisits the climate-policy interface and concludes that the development of policy does not stand, alone, as an adequate response to the challenges of climate change. (This is meant to move beyond, for instance, the fact that the U.S. did not sign Kyoto is what has kept us from developing a policy, much less a solution to the problem.) Further, an examination of the climate-policy interface shows that it is difficult for policy to develop on the weight of science-based knowledge alone. Science generates both knowledge and uncertainty and the uncertainty. In the absence of a policy motivator or catalyst, those with non-scientific interests in policy can use the uncertainty to keep policy from converging. Catalysts might include, for instance, public health risk - or a "smoking gun" like the ozone hole was for the ozone problem.
Economics is often a motivator for the development of policy at the regional, state, and local level. On a global scale economic motivators are far less clear. For the U.S., all statements of climate policy have been linked to the requirement that any action on climate change must not interfere with economic growth --- generally, expected to be 2-3% a year. This is an expectation of exponential growth, and exponential growth and exponential discount rates are central to the economic analysis of climate change.
The Stern Report is introduced. This is a large report commissioned by the British Government that, compared with previous reports on the economics of climate change, concluded that the cost of ignoring climate change was very high - on the order of 10% of Gross Domestic Product. This 2006 report was such a radical re-framing of the economics of climate change that it motivated many critical analyses. At the core of these analyses was that Stern used a very low discount rate, thus valuing the future much more highly than empirical economic information justified. This is a challenge of conventional wisdom, and for the moment the conventional wisdom seems to have won the credibility battle. Economics is, perhaps, a less compelling motivator for policy, at least global policy, than scientific knowledge.
In the end, all agree that the cost of carbon dioxide must be integrated into our economy. Many converge upon the idea of a carbon market, currently the favored policy vehicle.
- Review some basic ideas
- Science and Uncertainty
- Motivators, catalysts for policy
- Economics as a motivator?
- Exponential growth and discounts
- Stern Report
- Criticisms of Stern Report
- Markets as a Policy Vehicle
Additional Relevant Reading: