Introduction

This chapter compares the costs and benefits of three alternative policy strategies to reduce mankind's emissions of greenhouse gases and limit damage due to global warming.

It is particularly difficult to analyze the economics of policies to limit such emissions because expected benefits to be generated from such policy actions will materialize only in the distant future, whereas many of the costs will be incurred much sooner. Therefore the way in which future benefits are discounted to give a present value is crucial: How much is the prospect of $100 earned in 50 or 100 years worth to us today? This is discussed below in more detail before the model used for evaluating the three policy options is described.

The state of global warming science and policy

The Intergovernmental Panel on Climate Change (IPCC) provides a framework for scientists from across the world to share and evaluate the data generated by a range of computer models projecting future changes to atmospheric composition, average temperatures, and climate patterns. The IPCC periodically reviews this situation, most recently in the Third Assessment Report (TAR) published in 2001. This report compiles a vast amount of detailed scientific information, which is distilled into a “Summary for Policymakers” agreed to by all participating governments. This summary is the basis for planning future action.

The TAR projects an increase in average temperatures by 2100 in the range 1.4–5.8℃ (above the 1990 baseline).