The Copenhagen summit on climate change is going to fall short. Does this matter? Yes and no: yes, because the case for action is so strong; no, because the likely agreement would be inadequate. Tackling climate change will be hard. It is crucial that we achieve the goal effectively and efficiently. The likely further delays should be used to achieve just that.

My view that decisive action is justified is contentious. Sceptics offer two counter-arguments: first, that the science underlying climate change is highly uncertain; second, that costs exceed benefits.

Yet it is not enough to argue that the science is uncertain. Given the risks, we have to be quite sure the science is wrong before following the sceptics. By the time we know it is not, it is likely to be too late to act effectively. We cannot repeat experiments with just one planet.

The remainder of the article can be read here. Please post comments below.

By Alan Greenspan

The rise in global stock prices from early March to mid-June is arguably the primary cause of the surprising positive turn in the economic environment. The $12,000bn of newly created corporate equity value has added significantly to the capital buffer that supports the debt issued by financial and non-financial companies. Corporate debt, as a consequence, has been upgraded and yields have fallen. Previously capital-strapped companies have been able to raise considerable debt and equity in recent months. Market fears of bank insolvency, particularly, have been assuaged.

By Susan Schadler

The debate about how to prevent future crises focuses largely on improving financial sector regulation. Few  ideas have surfaced for strengthening institutional capacity to prevent macroeconomic policy faults, a key factor underlying the current crisis. Here, politicians seem to be settling for more of the same – “firm surveillance” by the International Monetary Fund. Clear thinking on a fresh start is needed.

First, some history. After 25 years of an essentially rules-based international macroeconomic order (fixed but adjustable exchange rates), the post-Bretton Woods system abandoned rules. Instead, flexible exchange rates (initially adopted by large countries and gradually by many others) were expected to put market pressure on countries with unsustainable policies. IMF surveillance -annual assessments of each member’s macroeconomic policies – was to buttress market discipline, especially when countries impeded market forces or markets sent wrong signals. 

Something has changed in the debate on man-made climate change: the US is engaged. But its engagement – or at least the engagement of President George W. Bush – is neither enthusiastic nor unconditional. In particular, at discussions among the heads of governments of the Group of Eight leading countries in Japan, Mr Bush stressed that China and India had to participate. In this, he was right: it will be impossible to tackle the problem without the participation of leading emerging countries. The question is on what terms they do so.

This is to ignore the debate on whether man-made climate change is either plausible or correctly assessed. I find the arguments sufficiently cogent to justify action. Above all, I find persuasive the argument of Professor Martin Weitzman of Harvard University that it is worth paying a great deal to eliminate the risk of catastrophe.* Those who reject such views need read no further.

The remainder of this column can be read here. Debate from our panel of economists appears below.

By Martin Wolf

We live in a positive-sum world economy and have done so for about two centuries. This, I believe, is why democracy has become a political norm, empires have largely vanished, legal slavery and serfdom have disappeared and measures of well-being have risen almost everywhere. What then do I mean by a positive-sum economy? It is one in which everybody can become better off. It is one in which real incomes per head are able to rise indefinitely.

How long might such a world last, and what might happen if it ends? The debate on the connected issues of climate change and energy security raises these absolutely central questions. As I argued in a previous column (“Welcome to a world of runaway energy demand”, November 14, 2007), fossilised sunlight and ideas have been the twin drivers of the world economy. So nothing less is at stake than the world we inhabit, by which I mean its political and economic, as well as physical, nature.

According to Angus Maddison, the economic historian, humanity’s average real income per head has risen 10-fold since 1820.* Increases have also occurred almost everywhere, albeit to hugely divergent extents: US incomes per head have risen 23-fold and those of Africa merely four-fold. Moreover, huge improvements have happened, despite a more than six-fold increase in the world’s population.

The remainder of this column can be read here. Debate from our panel of economists appears below.

By Martin Wolf

The point of the story of the boy who cried wolf is that, finally, a wolf did appear. I feel the same way about the intellectual heirs of Thomas Malthus. Malthusians have finally found a wolf called climate change. Many now agree. But it is far away and coming slowly. “If the worst comes to the worst,” mutter the rich to themselves, “we can always let our children cope.”

This is the complacency that the latest Human Development Report from the United Nations Development Programme attacks. It does a good job, too. But does it do a good enough job to turn the Bali climate change conference into a call for effective action? I fear not. This is not because it fails to make a morally sound case. It is rather because humanity will change its behaviour only when convinced that the lifestyle the better off enjoy now – and the rest of the world aspires to – remains in reach.

This cynical view of human behaviour is fully consistent with what has happened so far. For it is as if the Kyoto treaty had never been. Is this judgment too harsh? Consider just a few of the many facts contained in this report: atmospheric concentrations of carbon dioxide continue to rise at a rate of 1.9 parts per million a year; over the past 10 years the annual growth rate of emissions has been 30 per cent faster than the average for the past 40 years; if the rate of emission were to rise in line with current trends, stocks of CO2 in the atmosphere might be double pre-industrial levels by 2035; and that, argues the International Panel on Climate Change, would give a likely temperature increase of 3°C, though rises of over 4.5°C cannot be excluded. If the science is right, the world is doomed to significant climate change.

The remainder of this column can be read here. Debate from our guest economists appears below.