Common Tragedies

Thoughts on Environmental Economics


Posted by Daniel Hall on October 31, 2007

I went to the Brookings Institution’s event on climate change policy yesterday. Larry Summers gave the opening address.

The gist of his remarks concerned the comparison between the issues of health care in 1992 and climate change today. He said, “We knew what we needed to do in 1992, and we couldn’t get it done.” The unspoken implication was that if we don’t make progress on climate change policy soon, we’ll be paying the price 15 years down the road.

I don’t pretend to know enough about health care to say whether the analogy is apt or specious, but I had to agree with the person who later remarked to me that Larry always makes good copy.

His talk also laid out what he saw as the five key questions for designing mitigation policy:

1. How do we minimize the number of losers?

2. What is the right degree of vision? How ambitious should a policy be with regards to goals and time horizons?

3. How do we minimize uncertainties? Is uncertainty about price or quantity more worrisome?

4. How do we rigorously measure benefits, particularly if they are likely but diffuse and subject to uncertainty?

5. How do we address competitiveness and emissions leakage? At what price does this become a problem?

It looks to me like there’s plenty of material there to keep environmental economists employed for years to come!

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