ABSTRACT

There is hardly an aspect of greenhouse economics which is more fiercely disputed than the question of the optimal policy response. Several approaches to the problem can be distinguished on a methodological level. The most prominent one, at least among economists, is probably the costbenefit approach. In the cost-benefit approach the optimal policy is determined through a trade-off between the costs of policy action and the benefits from greenhouse damage avoided. This does not necessarily imply a strict cost-benefit analysis in the traditional sense, though, but more generally encompasses the idea that decisions emerge from the weighing up of ‘goods’ against ‘bads’. What the ‘goods’ and the ‘bads’ are, and how to weigh them, can again be disputed.