Climate Change Efforts Aren’t Efficient, Economists Say; Too Much Is Done With Few Results

The way climate change is currently regulated is not efficient according to economists’ cost-benefit analysis.

By Samantha Olson on April 25, 2014 8:27 PM EDT

Economists Believe Climate Change Isn't Treated Efficiently
After reevaluating the global approach to climate change, economists estimate an inefficient plan to decrease future costs. (Photo: <a href="http://www.sh / Samantha Olson)

Economics are reevaluating the past and current efforts being put forth on a global level to combat climate change, and are finding inefficiency. It isn't that people aren't making an effort to tackle climate change now in order to alleviate future environmental consequences, but the actions aren't worth the efforts.

Environmental economists are talking about the Climate Change 2014: Impacts, Adaptation, and Vulnerability report was released by the Intergovernmental Panel on Climate Change (IPCC), is the international body of experts who are organized to evaluate the science related to climate change.

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The IPCC's report estimates lower costs of climate change and higher costs of decline, which ultimately means that these efforts should work. However, when the estimates are adjusted for how people will act in reality, economists believe that this is not the case.

The real-world climate policy does not demand an ideal and uniform price for carbon, which according to economists means that the costs of emission reduction will be much higher than the IPCC's estimates.

If we carry heavier costs now than the benefits those costs will provide in the future then that is making us poorer now than we need be. And if we're not willing to bear the costs now that are smaller than the benefits in the future then that makes the future poorer than it need be. This is, absolutely, the standard analysis of this problem, this is the mainstream scientific consensus on this point.

If countries, especially wealthier countries who have more power to change the effect on climate because of emissions and finances, bear more of the burden of cost now than the benefits those costs will provide in the future, there is economic inefficiency.

Current United Nations negotiations focus on stabilizing atmospheric concentrations of greenhouse gases at lower levels than recommended. Economists disagree with lower levels because they are found to be unrealistic and generate feelings of failure when they aren't reached.

"The UN targets are probably never optimal. Using a utility discount rate that is more in line with those observed in public or private investment leads to substantially less stringent climate policy," says Richard S J Tol, co-lead author and professor or Economics, University of Sussex; and professor of the Economics of Climate Change, Vrije Universiteit Amsterdam.

Economists have coined the term "rational expectation" to define when reality is taken into consideration and a plan of action needs to be evaluated. In the case of climate change, the UN's target is too demanding because people don't take the possible severity of future consequences appropriately into account.

Putting aside all discrepancy to whether or not climate change is actually a global phenomenon, many economists view the environment's status as a functioning business.

"Climate change is a result of the greatest market failure the world has seen," Sir Nicholas Stern professor of Economics and Government at the London School of Economics.

Instead of agreeing on what temperature level or level of emissions should be limited, the amount of costs we're willing to afford are regulated. The future temperature consequences rise in an inefficient manner because financial cost is used as the constraint. Economists predict the ramifications will include undeterminable temperature rises.

"The combustion of fossil fuels is most probably the main cause of global warming, which is likely to induce substantial costs on the global economy. There is considerable uncertainty about the strength of these effects, as well as regarding their geographic distribution," says John Hassler, professor of Economics at the Institute for International Economic Studies.

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