Volume 11, Issue Supplement

This paper surveys the literature on the economic impact of climate change. Different methods have been used to estimate the impact of climate change on human welfare. Studies agree that there are positive and negative impacts. In the short term, positive impacts may dominate, but these are largely sunk. In the longer term, there are net negative impacts. Poorer people tend to be more vulnerable to climate change. There is a trade-off between development policy and climate policy. Estimated aggregate impacts are not very large, but they are uncertain and incomplete. Estimates of the marginal impacts suggest that greenhouse gas emissions should be taxed, and that the emission reduction targets announced by politicians are probably too ambitious.

At least half of the global warming observed during the 20th century of about 0.8◦C is of anthropogenic origin and mostly due to enhanced atmospheric carbon dioxide levels in response to the burning of fossil fuels. The climate problem is therefore closely linked to the way we produce energy. Climate models predict a massive warming by the end of the century should global greenhouse gas emissions not be strongly reduced. The Intergovernmental Panel on Climate Change (IPCC) reports that the warming can amount to up to 4◦C in a worst case scenario, which would be unprecedented in speed and extent in man’s history. This can lead to an increase of extreme weather events and a rise of global sea level by up to 1m. A less known impact of increasing atmospheric carbon dioxide is ocean acidification, as the oceans take up large amounts of carbon dioxide. Ocean acidification potentially threatens marine life and global food production.

This paper surveys the literature on the economic impact of climate change. Different methods have been used to estimate the impact of climate change on human welfare. Studies agree that there are positive and negative impacts. In the short term, positive impacts may dominate, but these are largely sunk. In the longer term, there are net negative impacts. Poorer people tend to be more vulnerable to climate change. There is a trade-off between development policy and climate policy. Estimated aggregate impacts are not very large, but they are uncertain and incomplete. Estimates of the marginal impacts suggest that greenhouse gas emissions should be taxed, and that the emission reduction targets announced by politicians are probably too ambitious.

In this paper, we describe the determinants of the socially efficient discount rate for the distant future. We provide various arguments in favour of a decreasing term structure. They are based on a precautionary argument given the rapid accumulation oif uncertainties affecting the future growth of our economies.We recommend a real discount rate of 2% for time horizons exceeding 50 years. A risk premium should be added to this rate if the project yields cash flows that are positively correlated with the growth of the economy.

Climate change ranks high on the policy agenda of the European Union (EU) which considers itself as a leading force in the battle against global warming. The EU is committed to the objective of limiting the rise in global average temperature to no more than 2◦ Celsius above pre-industrial levels in order to hedge against dangerous anthropogenic interference with the climate system. In this paper, we provide a critical appraisal of EU climate policy over the last two decades. Given the global public good properties of climate protection we derive guidelines for sound unilateral action and evaluate contemporary EU climate policy against these guidelines. We find that - while the EU must be praised for pushing international agreements and going ahead with ambitious emission reduction targets - the implementation of EU climate policies is likely to make climate protection much more costly than necessary.

The paper reviews sets of policy options available and currently being utilized for climate change mitigation. It outlines the state of play and challenges to climate policy agreements incumbent within the UN global climate change regime, before turning to a discussion of the changing dynamics in U.S. and North American climate change politics. It concludes with some observations and questions about ongoing climate politics, as human activity continues to alter the global climate and human political systems continue to demonstrate their incapacity to address the causes and consequences of climate change.