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This chapter sketches some serious disputes between rival economic analyses of climate change. Such disputes result in vastly different policy recommendations, and involve serious differences in fundamental assumptions. The chapter argues that, contrary to initial appearances, these differences do not reflect narrow technical issues within economic theory, but rather deep ethical claims that fill fundamental gaps in that theory. Moreover, it claims that the most common recent arguments do not fill these gaps, and neither does the (perhaps heroic) claim that some appropriate kind of economic modeling must in principle be possible. While this does not mean that good climate economics is not worth pursuing, it does suggest that we are far from the position where we can confidently rely on such analysis when deciding how to shape the future of the planet.

This chapter provides an introduction to the UN Framework Convention on Climate Change (UNFCCC) system and the key institutions as well as to the processes leading up to, and from, the adoption of the Kyoto Protocol. It introduces some of the key concepts that will be further developed in later chapters. With the release of the IPCC Fourth Assessment Report it is clear that radical action needs to be taken to avoid dangerous climate change. The Stern Review forcefully reminds us that early, radical action in reducing emissions of greenhouse gases is also the most economically sensible approach.

This chapter examines the Labour government's roads and traffic policies in Great Britain in the decade since 1998. It explains the principles of a sustainable roads and traffic policy, taking into account broad sustainability objectives and the recommendations of two special policy reviews: the Eddington Review on transport, productivity, and competitiveness; and the Stern Review on climate change. The chapter analyses the extent to which ministers have embraced a sustainable roads policy in practice and identifies some of the gaps between where policy ‘is’ and where it ‘needs to be’. It argues that the failure of the government to embrace a national system of road-user charging in any meaningful sense is a key failure of policy.

This chapter examines the disconnect between the science and policy of climate change. Before explaining why such disconnect exists, the chapter looks at the serious adverse trends, especially in the energy and transport sectors. It then considers why the Kyoto Protocol has achieved so little before turning to the key concepts. Kyoto is based upon carbon production, not consumption, which conveniently places the burden of greenhouse gas emissions reduction on those countries that produce energy-intensive goods, rather than those that consume them. The chapter reevaluates the relationship between carbon consumption, sustainability, and economic growth. It also discusses the Stern Review, its economic framework, and, in particular, its estimates of the damage and mitigation costs. It concludes by assessing the negotiations for a post-2012 framework.

Having argued in Chapter 4 that there are ecological constraints on economic growth, this chapter starts by showing that ecological change in turn can exacerbate financial instability, thereby compounding the problem. So proposals of liberal environmentalism, which, like the Stern Review, highlight the economic benefits of environmental policies, may overstate the scope of win–win solutions. The idea that ecological costs and benefits can be expressed in economic terms depends on assumptions about the stability and predictability of prices. Yet radical uncertainties underlie the non-reliability of money as a medium for transferring value over time as well as across geopolitical space. Accordingly, proposals for providing funds for compensation or adaptation in relation to ecological harms are called into question, and attempts to determine appropriate future discount rates are rendered radically uncertain. Meanwhile, the monetization of ecological goods does provide opportunities for short-term business profits that may tend to fuel the underlying problem.

Greenhouse gas (GHG) emissions are externalities and represent the biggest market failure the world has seen. We all produce emissions, people around the world are already suffering from past emissions, and current emissions will have potentially catastrophic impacts in the future. Thus, these emissions are not ordinary, localized externalities. Risk on a global scale is at the core of the issue. These basic features of the problem must shape the economic analysis we bring to bear; failure to do this will produce, and has produced, approaches to policy that are profoundly misleading and indeed dangerous. The purpose of this chapter is to set out what I think is an appropriate way to examine the economics of climate change, given the unique scientific and economic challenges posed, and to suggest implications for emissions targets, policy instruments, and global action. The subject is complex and very wide-ranging. It is a subject of vital importance but one in which the economics is fairly young. A central challenge is to provide the economic tools necessary as quickly as possible, because policy decisions are both urgent and moving quickly—particularly following the United Nations Framework Convention on Climate Change (UNFCCC) meetings in Bali in December 2007. The relevant decisions can be greatly improved if we bring the best economic analyses and judgments to the table in real time. A brief description of the scientific processes linking climate change to GHG emissions will help us to understand how they should shape the economic analysis. First, people, through their consumption and production decisions, emit GHGs. Carbon dioxide is especially important, accounting for around three-quarters of the human-generated global-warming effect; other relevant GHGs include methane, nitrous oxide, and hydrofluorocarbons (HFCs). Second, these flows accumulate into stocks of GHGs in the atmosphere. It is overall stocks of GHGs that matter and not their place of origin. The rate at which stock accumulation occurs depends on the “carbon cycle,” including the earth’s absorptive capabilities and other feedback effects. Third, the stock of GHGs in the atmosphere traps heat and results in global warming; how much depends on “climate sensitivity.”

It is widely recognized that anthropogenic climate change will have harmful effects on many human beings and in particular on the most disadvantaged. In particular, it is projected to result in flooding, heat stress, food insecurity, drought, and increased exposure to waterborne and vector-borne diseases. Various different normative frameworks have been employed to think about climate change. Some, for example, apply cost-benefit analysis to climate change. The Stern Review provides a good example of this approach. It proceeds by comparing the costs (and any benefits) associated with anthropogenic climate change with the costs and any benefits of a program for combating climate change. On this basis, it argues that an aggressive policy of mitigation and adaptation is justified. Whereas the costs of combating climate change, according to Stern, are quite low, the costs of “business of usual” would be considerable. Other analysts adopt a second perspective and conceive of climate change in terms of its impact on security. For example, the High Representative and the European Commission to the European Council issued a statement on Climate Change and International Security, which argues that climate change is “a threat multiplier which exacerbates existing trends, tensions and instability.” It argues that climate change will contribute to the following kinds of insecurities: tensions over scarce resources; land loss and border disputes; conflicts over energy sources; conflict prompted by migration; and tensions between those whose emissions caused climate change and those who will suffer the consequences of climate change. In addition to the “economic” approach and “security-based” approach, some adopt a third different perspective, according to which the natural world has intrinsic value. This ecological approach condemns human-induced climate change because it is an instance of humanity’s domination and destruction of the natural world. For all of their merits, these three perspectives omit an important consideration: the impact of climate change on persons’ fundamental human rights. In this chapter, I argue that it is appropriate to analyze climate change in terms of its impact on human rights.

This book deals with the economics and politics underlying climate change, with particular emphasis on the incentives of the main players: the United States, EU, and China. It considers the policies that governments can put in place to reduce greenhouse gas emissions, and ultimately shift our economies onto a low-carbon path. It examines the wisdom of the basis of much of the climate change consensus, along with the Stern Review's main findings. The book also looks at the geography of the costs and benefits of climate change, taking into account the radically different perspectives of Africa, China, Europe, and the United States as well as the prospects for a new global agreement.

Energy is central to our existence and our way of life. We use it in virtually all aspects of life: manufacturing the myriads of goods that we have come to depend on, growing our food, transporting goods and people, controlling our environment, communicating with one another, entertaining ourselves, and the list goes on. By and large, the standard of living of a society is directly linked to its energy consumption. Indeed, today’s technological society can be described, quite literally, as “turning oil into everything else that we eat or use.” Energy use is so pervasive that we often fail to recognize its role and are only reminded of our dependence on it when for some reason or another there is a shortage. To be sure, such reminders have occurred and will occur every so often. However, the shortages we have overcome thus far are very minor compared with what may lie ahead. With ever increasing numbers of people and nations striving to improve their standard of living, the demand for energy is soaring. At the same time, traditional sources of energy are being depleted, and even their current level of use poses a serious threat of global climate change. How are we going to provide the vast amounts of energy that we will need or desire in the future? That is the central question that this book addresses. Effective resolution of any major societal issue requires easy access to reliable and relevant information. When an issue is not only complex and multifaceted but also essential to maintaining the very fabric of the society, a lack of comprehensible information makes the public’s role and government leadership less effective, and appropriate solutions become more difficult to implement. This is the situation today with global energy—arguably the world’s largest industry and one central to all our lives. On the one hand, the public is generally unaware that a pervasive, long-term problem exists and that the world is facing a complex and potentially perilous, perhaps even revolutionary, future.