Ethos Perspectives

Climate Change

Comments/Analysis
Climate change is a problem of the global commons. It is a challenge which transcends political and territorial boundaries, and has elements of almost all the market failures known to economists. Thus, it is not surprising that there is a cacophony of competing opinions on its impacts and the course of remedial actions to be taken.

Nobel Economics Laureate Thomas Schelling has pointed out that while the basics of global warming are not in scientific dispute, the uncertainties regarding its impacts, the costs of mitigation and adaptation, and what actions countries should take are immense. It is also unclear how political responses to climate change will develop over time. Despite an emerging consensus on the importance of climate change action, the "global commons" nature of the climate change problem and the individual calculations of countries make comprehensive global action unlikely in the near future. Climate change is also likely to exacerbate existing resource constraints and increase competition for resources, raising the risks of conflict.

In view of the risks and uncertainties, governments should consider adopting an insurance/risk management approach to deal with climate change, rather than to wait until the uncertainties are fully resolved. As Schelling noted, "it is interesting that this idea that costly actions are unwarranted if the dangers are uncertain is almost unique to climate. In other areas of policy, such as terrorism, nuclear proliferation, or vaccination, some 'insurance' principle seems to prevail: if there is a sufficient likelihood of sufficient damage we take some measured anticipatory action."

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