Cameron Hepburn

9 September 2006

The Economist – The heat is on – A survey of climate change

Dismal calculations

The economics of living with climate change or mitigating it

SCIENTISTS are better at getting headlines than economists are: doom for the planet makes better copy than cost-benefit analyses. That may be why some economists feel that the issue has been captured by economically illiterate climatologists who do not seem to understand that mitigating climate change means spending real money now in exchange for uncertain benefits in a remote future. They have been working hard to put figures on the costs and benefits of climate change and of trying to mitigate it. That has not been easy. Economists struggle under a cascade of uncertainties if how much carbon dioxide the world goes on emitting (which itself depends on whether governments pay attention to the scientists’ warnings); how fast temperatures will increase in response to greater concentrations of carbon dioxide (which depends on feedback mechanisms); what effect climate change will have on economies (which depends on how good people are at adapting to it); and many more.

It is those outlying possibilities that have persuaded some economists that it is worth trying to mitigate climate change. As Cameron Hepburn of Oxford University says, “I’m not especially worried  about the mean. It’s the tail. If governments should ever be risk-averse, it’s in the face of this sort of distribution. You can think about the risks as similar to those from terrorism.”