Conclusions

There is no “atmospheric economics” distinct from “terrestrial economics.” Analyzing global warming requires the standard economic tools. But because of the unique characteristics of climate change – the time frame, the uncertainty, and the global aspects – some tools have been sharpened or redesigned to meet new challenges. The clearest examples are in discounting, policy under profound uncertainty, integrated modeling of economic and environmental systems, environmental policies using market incentives, policies in second-best contexts, and the economics of global public goods. In addition, value judgments and thus ethical issues permeate global warming economics to an unusual extent and are reflected in the literature.

How successful has economics been in answering the three questions that form the structure of the book? The answers are mixed. Benefit cost (BC) is the main approach to determining how warm is too warm. Its origins in building dams and bridges with public funds are far removed from climate change, and its weaknesses in this latest assignment are easy to document. The main ones are the uneasy relations between efficiency and equity, discounting over many generations, which is a novel task for BC, and the limited ability to accommodate profound uncertainty. These weaknesses are compounded by long-standing difficulties in monetizing environmental effects and in using social weighting. The last is of special importance in light of current and prospective inequities in the international distribution of income and the disproportionate damages to be borne by poor countries.