THE ECONOMICS OF CLIMATE CHANGE
     

More than 10 years after the event 'What are the Economics of the Climate Change?' economists urge government and climate tables to start with CO2 pricing. The pre-recommendations of the Royal Association for Political Economy on climate policy "Costs, opportunities and choices" were presented to Minister Wiebes of Economic Affairs and Climate on 29 November 2018. The preliminary recommendations contain an urgent appeal to the government and the negotiators at the Climate Tables: CO2 pricing is the only way in which global warming can be effectively prevented.

As a conclusion, the Pre-report describes: In order to keep the global temperature within safe limits, the world has to get rid of its addiction to fossil raw materials in the next ten to thirty years. This requires an immediate moratorium on the burning of coal, elimination of all direct and indirect subsidies for the use of fossil fuels, and a commitment to a rapidly increasing path of CO2 prices for all economic regions and sectors. It is important:

  • that CO2 emissions are taxed multilaterally and CO2 rights can be traded internationally,
  • that fossil fuel lobbies are rejected, and
  • that subsidies are avoided for all kinds of ways to reduce emissions, unless there is market failure of learning by doing effects.
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More than 10 years earlier, there was debate about 'the Economics of the Climate change', organised by the Royal Association for political economy on Friday 13 April 2007, Erasmus University Rotterdam. The movie "An Inconvenient Truth" from Al Gore made us awake. British leading economist Nick Stern figured out that if do nothing, we make a loss of 5% GDP yearly.

Environment is back on the political agenda. EU leaders agreed about an increase of carbon monoxide of 20%. An agreement was made too that in the year of 2020 at least 20% of energy need to exist sustainable resources. How to realize these goals? Which mixture of policy-instruments is the optimum? What are the costs for the society and the public treasury? How should the European goals be translated to the national goals? What has to be done at least by the government?

Also questions arise such as must the present generation sacrifice prosperity? Or, if next generations will become richer, will they invest in the enormous amounts to force back the change? In other words:

What are the Economics of the Climate Change?

It becomes considered as an economic problem. Less noxious consequences. Uncertainty, period and coverage are important issues in this case. The debate was a result from STERN's review on the economics of climate change (2006), which shows impacts on food, water and ecosystems (coral reefs, extreme wheather events).

The review shows also a diagram of stabilisation and commitment to warming from 400 ppm CO2e till 750ppm CO2e and its eventual temperature change in a range from 0 degree till 5 degrees. The review concluded: “This Review has assessed a wide range of evidence on the impacts of climate change and on the economic costs, and has used a number of different techniques to assess costs and risks. From all of these perspectives, the evidence gathered by the Review leads to a simple conclusion: the benefits of strong and early action far outweigh the economic costs of not acting.” (London School of Economics and Political Science)

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