Climate change is the hardest political problem the world has ever had to deal with. It is a prisoner’s dilemma, a free-rider problem and the tragedy of the commons all rolled into one.
Ken Caldeira, an atmospheric scientist at the Carnegie Institution (says) “If we already had energy and transportation systems that met our needs without using the atmosphere as a waste dump for our carbon- dioxide pollution, and I told you that you could be 2% richer, but all you had to do was acidify the oceans and risk killing off coral reefs and other marine ecosystems, risk melting the ice caps with rapid sea-level rise, shifting weather patterns so that food-growing regions might not be able to produce adequate amounts of food, and so on, would you take all of that environmental risk, just to be 2% richer?” He has, he says, often asked audiences this question; nobody has ever answered “yes”.
Greenhouse-gas emissions targets can be implemented through three sorts of policy instruments—regulation, carbon-pricing and subsidies. Governments generally like regulation (because it appears to be cost-free), economists like carbon prices (because they are efficient) and businesses like subsidies (because they get the handouts).
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