307
See also: Provision of public goods and services 46–47 ■ Demographics and economics 68–69 ■ External costs 137 ■
Development economics 188–93 ■ The economics of happiness 216–19
The implications are as much
economic as environmental, but
both economists and governments
are divided on the measures that
should be taken. Until recently,
many have argued that the costs
of combating climate change are
more damaging to economic
prosperity than the potential
benefits. Some continue to dispute
the evidence that climate change
is human-made, while others argue
that global warming could even be
beneficial. A growing number now
accept that the issue is one that
must be addressed, and economic
solutions have to be found.
The economic facts
In 1982, US economist William
Nordhaus published How Fast
Should We Graze the Global
Commons?, looking in detail at
the economic impact of climate
change and possible solutions. He
pointed out that certain features of
the climate problem make it unique
in terms of finding economic
solutions: the long time scale,
the uncertainties involved, the
international scope of the problem,
and the uneven distribution of
benefits and costs across the globe.
In 2006, the UK government
commissioned a report by British
economist Nicholas Stern on
the economics of climate change.
The Stern Review was unequivocal
in its findings; it presented sound
economic arguments in favor
of immediate action to reduce
greenhouse gas emissions. Stern
estimated that the eventual cost
of climate change could be as much
as 20 percent of GDP (gross
domestic product, or total national
income), compared with a cost ofCONTEMPORARY ECONOMICS
The biggest
challenge for
collective action
is climate change.Energy use driven by economic
growth is causing pollution,
accelerating climate change.Pollution in one
country affects
other countries...To be effective,
measures to curb carbon
emissions must be adopted
worldwide, even by those
who do not want to
adopt them.Firms and countries
produce too much
pollution because they
don’t face the full costs of
their actions.The Industrial Revolution that
began about 150 years ago has led
to countries burning large amounts of
fossil fuels. These emissions create a
“greenhouse effect” in the atmosphere.
around 1 percent of GDP to tackle
the problem if action was taken
promptly. In 2009, Nordhaus
estimated that without intervention,
economic damages from climate
change would be around 2.5
percent of world output per year by- The highest damages would
be sustained by low-income
tropical regions, such as tropical
Africa and India.
The question was no longer
whether we could afford to cut
emissions, but whether we could
afford not to, and how this could
best be achieved. There are
strong arguments for government
intervention: the atmosphere can ❯❯