ABSTRACT
Uncertainty is a dominant characteristic of environmental externalities, including the accumulation of greenhouse gases leading to climate change. We understand well neither the effects of climate change nor the costs of controlling greenhouse gases. This is one reason considerable sums are expended in trying to better understand this problem. An additional factor frequently comes into play having to do with the cumulative or stock effects of greenhouse gases. It is not the emissions of greenhouse gases that directly cause adverse effects; rather it is the stock of these gases that may lead to climate change and these stocks change slowly with a great deal of inertia. The process of emitting is not readily reversible. These two aspects of the problem-stock effects and uncertainty-lead to a tension between instituting control and delaying control.1 Some in society will desire control of greenhouse gases before climate change is well understood, citing the irreversible nature of additions to the global stock of greenhouse gases. Others in society may urge delaying control until the problem is clearly delineated. If, ex post, the problem turns out to be less severe than expected then those urging delay will have been proved correct (ex post). If on the other hand, the problem turns out to be more severe than expected, then delay can be very costly indeed.
