October 11, 2005

Money and global warming

Thomas Schelling has just been awarded the Nobel Prize in Economics. He has written about global warming (found via Marginal Revolution):
Abatement programs in a number of econometric models suggest that doing something worthwhile would cost about 2 percent of GNP in perpetuity. Two percent of the U.S. GNP is over $100 billion a year, and that is an annual cost that would continue forever. [...]

Is 2 percent of GNP forever, to postpone the doubling of carbon in the atmosphere, a big number or a small one? That depends on what the comparison is. A better question—assuming we were prepared to spend 2 percent of GNP to reduce the damage from climate change—is whether we might find better uses for the money.

I mentioned one such use—directly investing to improve the economies of the poorer countries [which are more vulnerable to climate changes than developed countries]. Another would be direct investment in preserving species or ecosystems or wilderness areas, if the alternative is to invest trillions in the reduction of carbon emissions.

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