THINKING ECONOMICALLY ABOUT CLIMATE CHANGE

Uncertainty over both the regional impacts and timing of climatic changes, the way they tend to magnify the likelihood of so-called 'natural' disasters and their irreversibility, require careful analysis of policy options. From an economic standpoint, the best approach is to apply 'cost-benefit thinking'. The essential trade-off is between doing nothing now and investing in either important preventive or adaptive measures. The choices involve analysis of incurring costs now against the benefits of reducing vulnerability and future damage costs. For any given level of warming, the aim is to minimize the sum of policy costs and costs of adaptation by individuals. Any resulting policy decision will have to address issues of international cooperation and compensation. These considerations may in turn influence the resulting policy choices between 'carbon' taxes, marketable permits and regulatory restrictions. © 1990.