By Martin Wolf

Energy security and climate change are two of the most significant challenges confronting humanity. What we see, in response, is the familiar capture of policymaking by well-organised special interests. A superb example is the flood of subsidies for biofuels. These are farm programmes masquerading as answers to energy insecurity and climate change. Not surprisingly, they have the depressing characteristics of such programmes: high protection, open-ended support to producers, and indifference to economic rationality.

Already the support in members of the Organisation for Economic Co-operation and Development costs about $13bn to $15bn a year. But this sum generates much less than 3 per cent of the overall supply of liquid transport fuel. To bring the biofuel share to 30 per cent, as some propose, would cost at least $150bn a year and probably more, as marginal costs rose.

Someone needed to take a close look at the rationality of all these supports. An excellent report from the Global Subsidies Initiative of the International Institute for Sustainable Development does just that. It does not tell a pretty story.

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By Lawrence Summers

With the accumulation of scientific evidence and its persuasive presentation to the public, the global warming debate has reached a new stage. Those who still deny that human activity is warming the planet, or claim that “business as usual” can continue indefinitely without profoundly adverse consequences, are increasingly seen as the moral and intellectual equivalent of those who deny that tobacco has adverse consequences for human health. While there is probably excessive euphoria in some quarters over the economic benefit of green policies, it is now beyond debate that there are huge opportunities to reduce emissions with economic benefit or negligible economic cost. It has been estimated that worldwide subsidies to energy use approach $250bn.

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.

Those who believe in the free market are highly resistant to the idea of man-made climate change, let alone to arguments for government action to halt emissions of greenhouse gases. Is this resistance rational? Or is it another case of the human desire to believe true what is merely convenient? On one point these sceptics are correct: the man-made climate change hypothesis appeals to believers in environmental limits to growth, the evils of capitalism and the need for government regulation. Lord Lawson, the former British chancellor of the exchequer, makes that point well in a recent assault on the activists.* But what should matter is not the emotions that drive the people on either side of the debate, but rather whether the arguments advanced are persuasive. Sceptics start by arguing that the science behind the man-made warming hypothesis is flawed. Some even argue that it is a fraud, in which case it would be the biggest and potentially the costliest ever. Scientific knowledge is indeed provisional. The remainder of Martin Wolf’s column can be read here (FT.com subscribers only). Discussion from our guest economists is free.

What is the chance of effective action to curb climate change? “Not much” is the answer. This is not because the costs of action would be prohibitive, at least according to the report on climate change by Sir Nicholas Stern published last week.* It is because the obstacles to achieving the necessary global co-operation are so steep. Sceptics worry that costly action is likely. But believers in climate change have far better reason to be worried.

The report produced by Sir Nicholas last week called for efforts to stabilise greenhouse gas concentrations at between 450 and 550 parts per million by 2050. By then, global emissions would have to be at least 25 per cent below current levels, even though the world economy may be between three and four times bigger.

Yet, according to the report, stabilising concentrations at 550ppm might cost only about 1 per cent of gross domestic product, with a range between minus 1 per cent (a benefit) and plus 3.5 per cent (a cost). Thus, the report says comfortingly, we can tackle climate change at minimal cost to living standards. So why, given the growing consensus on the threat, is it so hard to forestall it? It is because this is an extraordinarily difficult challenge for humans to deal with.

The remainder of Martin Wolf’s column can be read here (FT.com subscribers only). Discussion from our guest economists is free – click ‘Comments’ below.

Repent, for the end of the world is nigh. That is a warning one would expect to come from an evangelical preacher or an environmental doomsayer, not from a sober economist. Yet that is, in essence, what Sir Nicholas Stern, author of the British government’s new report on climate change, is saying. The tone may be sober, but the conclusion – act now before it is too late – is not.

Hitherto many economists, business-people and politicians, particularly in the US, have argued that, given both the uncertainties and the high costs of taking possibly unnecessary action, the best policy is to wait, see and, if necessary, adapt. The contribution of this report is to reverse that logic. It argues that, given these very same uncertainties and the relatively low costs of acting now, the best policy is action.

How and how convincingly does the review make this case? The answer, I suggest, is: “Sufficiently so.”

The remainder of Martin Wolf’s column can be read here (FT.com subscribers only). Discussion from our guest economists is free – click ‘Comments’ below.