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The
debate is over
Challenges to the Economic
Approach:
-Free
Markets
-Pricing the Planet
The Case for Market
Intervention
Free Market Strategies
Carbon
Taxes
Emissions
trading: Cap and Trade
Economic Adaptation
Further
Information
Comments & questions to:
awerth@macalester.edu
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Challenges
to the Economic Approach:
Free
Markets
While it is clear to many that the challenge and
danger of global warming is beyond just social, political, ethical or
spiritual concerns, there has been great focus in the media and
politics on the economic costs. As with any proposed scheme
today, first we must ask; “Is it a good idea?” and soon after; “How
will we pay for it?” Concern over the cost of addressing global
warming has weighed heavily in the debate. This is greatly
complicated by the fact that no one knows the actual costs of
addressing global warming or what will happen if we do not. The
third IPCC report estimates a cost of plus or minus 1% of world
GDP but published estimates run all over the place. “It
will hurt the economy” is still a prevalent argument and was one reason
George W. Bush gave for not signing the Kyoto Protocol in 2001.
The very suggestion that GDP must be sacrificed is contentious to many
and contradicts what many Americans have been taught is essential for
prosperity. Mitigating carbon will therefore hurt economic
prosperity and burden the average individual in getting what they need.
"Uncertainty
is an argument for a more, not less, demanding goal, because of the
size of the adverse climate-change impacts in the worst-case scenarios."
-STERN REVIEW: The Economics of Climate Change
The strongest rebuttal of the argument that
mitigation schemes will hurt the economy is in the form of the Stern
report. This report was prepared for the British government by
the economist Sir Nicholas Stern and argues that “The benefits of
strong, early action on climate change outweigh the costs. ” He
claims that given the predicted effects from the IPCC, not doing
anything will result in much greater damage than the cost of addressing
the problem now. Therefore the cost of addressing climate change
is really an investment in the future; a cost paid now that will
benefit future generations.
Pricing the Planet
Another argument against using market tools is that
in order to use these tools, we must put a price on the
environment. Environmentalists have claimed that taxes and
trading schemes equate offering “licenses to pollute” and are therefore
unacceptable. In its place they often prefer legislative
measures that will set strict limits and more strongly reflect the
moral imperative of reducing emissions. They also argue that
market strategies can have unequal effects on some people and areas
over others. This concern has weakened somewhat in the last few
years as tax and trading schemes have gained acceptance.
Economists often offer the rebuttal that legislation will often make
polluters take unnecessarily expensive measures and that market schemes
allow for cost minimization in reducing emissions. Legislation
can also be cumbersome and won’t adapt to changing conditions fast
enough. Nonetheless, pricing the environment remains a concern,
though it varies given the context.
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Last updated: 2/2/2006
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