In the public at large, including sizeable sections of the business community, a new consensus on climate change has emerged: it is happening; it is important; and something needs to be done. The publication last week of the latest assessment from the intergovernmental panel on climate change and discussions at this year’s annual meeting of the World Economic Forum in Davos made the growing agreement on all these points plain.
Yet there is one group among whom dissent reigns: economists. It was to them, above all, that Sir Nicholas Stern’s review on the Economics of Climate Change was addressed. It has failed to persuade. So much the worse for economists, the environmentally minded will declare.
I disagree. Economists are trained to address the costs and benefits of alternative policies rigorously. Scientists are not. What then do economists object to in the arguments for early and forcible action to halt the increase in the stock of greenhouse gases? In essence, they make three arguments: first, the Stern review has exaggerated the economic costs of climate change; second, it has underestimated the costs of mitigating emissions; and, third, it has employed the wrong discount rate for relating near-term costs of mitigation to the costs of continuing on our present course.
The remainder of Martin Wolf’s column can be read here (FT.com subscribers only). Discussion from our guest economists is free.