ABSTRACT
Economists are convinced that the costs of striving for a more ambitious limitation of global warming are too high as compared to the costs that will be connected with an increase of average global temperature to three degrees centigrade or even more. This chapter show that these claims of mainstream climate economics are deeply wrong and cannot call for being based on the authority of economics. After a first overview of environmentally relevant market failures, the chapter explains the concept of a negative externality in more detail and then highlight the presumptions neoclassical natural resource and environmental economics makes when employing the concept. Three kinds of market failures are especially relevant for environmental economics (and climate economics): the overuse of common property resources, the underproduction of collectively beneficial goods and, finally, externalities. The chapter shows that despite the many positive uses economic cost--benefit analyses may have, current mainstream climate economic cost--benefit analyses are deeply flawed and even dangerous.
