Global warming: economists don't know best

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The Independent Online
From Mr Jeremy Berkoff

Sir: Frances Cairncross may be right that the most rational course is to adapt to climate change when it happens, but the operative word is "may". Nowhere in her article does she address the risks involved.

What happens if global warming greatly accelerates? To quote William Cline to the effect that the benefits of taking action on global warming do not overtake the costs until about 2150 implies that he actually knows. He doesn't, because no one knows - for certain.

Moreover, to state that the world has only so much wealth to devote to solving environmental problems is nonsense. It may decide to devote only so much, but that is quite another matter. The choice is not merely, or even significantly, between resolving water pollution problems and anticipating global warming, but in the proportion of world wealth that is devoted to any particular purpose in competition with all others. And, given the dangers involved, I would have thought that reducing the risks associated with global warming should by any standards be a priority.

The insurance industry makes its living by distributing known risks among many. Unfortunately, there is only one earth and the risks of global warming are unknown. Moreover, those who cause the problem do not share equally in the risks, and those that take action benefit those who don't. Thus, the option of leaving it to the market (however defined) is unavailable. Since the risk premium will be to some extent arbitrary, and since some consideration should presumably be given to equity, the only possible mechanism is "the laborious negotiation of complex international treaties" which Ms Cairncross so derides.

Yours faithfully,

JEREMY BERKOFF

Cambridge

28 March

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