ABSTRACT
Climate change, arising from the greenhouse effect of heat-trapping gases, is a global problem. All countries are involved in both its causes and consequences. Developed countries have been responsible for the major portion of historical emissions, and have the highest per capita emissions, but emissions by developing countries will grow considerably in the coming decades.
The most recent scientific evidence indicates that during the twenty-first century the global temperature may increase more than 3°C if countries do not implement additional policies. In addition to simply warming the planet, other predicted effects include disruption of weather patterns and possible sudden major climate shifts.
Economic analysis of climate change involves estimating costs and benefits. The benefits in this case are the damages potentially averted through action to prevent climate change; the costs are the economic costs of shifting away from fossil-fuel dependence, as well as other economic implications of greenhouse gas reduction.
Relative evaluation of costs and benefits depends heavily on the discount rate selected. Because damage tends to worsen over time, the use of a high discount rate leads to a lower evaluation of the benefits of avoiding climate change. In addition, effects such as species loss and effects on life and health are difficult to measure in monetary terms, as are the possibilities of uncertain but potentially catastrophic “runaway” effects. Also, depending on the assumptions used in economic models, the costs of policies to avoid climate change could range from a 4% decrease to a 4% increase in GDP.
Impacts of global climate change will fall most heavily on developing countries. Most economic analyses recommend some form of action to mitigate climate change, but vary 351in terms of the urgency and the extent of proposed remedies. Meeting the targets set in the Paris Climate Agreement will require drastic action to reduce emissions, implying major changes in global patterns of energy use and other policies to promote carbon reduction.
