Project

The economics of climate change

Goal: to develop an understanding of the problem of global heating (climate change) in terms of institutional economic behaviour

Date: 1 October 1989

Updates
0 new
0
Recommendations
0 new
0
Followers
0 new
4
Reads
0 new
26

Project log

Terry Barker
added a project goal
to develop an understanding of the problem of global heating (climate change) in terms of institutional economic behaviour
 
Terry Barker
added 9 research items
The problem of avoiding dangerous climate change requires analysis from many disciplines. Mainstream economic thinking about the problem has shifted with the Stern Review from a single-discipline focus on cost-benefit analysis to a new inter-disciplinary and multi-disciplinary risk analysis, already evident in the IPCC Third Assessment Report. This shift is more evidence of the failure of the traditional, equilibrium approach in general to provide an adequate understanding of observed behaviour, either at the micro or macro scale. The economics of the Stern Review has been accepted by governments and the public as mainstream economic thinking on climate change, when in some critical respects it represents a radical departure from the traditional treatment. The conclusions regarding economic policy for climate change have shifted from “do little, later” to “take strong action urgently, before it is too late”. This editorial sets out four issues of critical importance to the new conclusions about avoiding dangerous climate change, each of which have been either ignored by the traditional literature or treated in a misleading way that discounts the insights from other disciplines: the complexity of the global energy-economy system (including the poverty and sustainability aspects of development), the ethics of intergenerational equity, the understanding from engineering and history about path dependence and induced technological change, and finally the politics of climate policy.
The diagrammatic representation of climate change, adaptation and mitigation is important in conceptualizing the problem, identifying important feedbacks, and communicating between disciplines. The Synthesis Report of the IPCC's Third Assessment Report, 2001, uses a “cause and effect” approach developed in the integrated assessment literature. This viewpoint reviews this approach and suggests an alternative, based on stocks and flows. The alternative gives a much richer representation of the problem so that it includes the enhanced greenhouse effect, ancillary benefits of mitigation, the distinction between climate-change and other stresses on natural systems, and a more refined distinction between adaptation and mitigation.