As discussed in Section 9. 3 of the textbook, economists make the general statement that any action taken to mitigate climate change involves trade-offs between two social costs; namely greenhouse abatement and greenhouse damage costs. To view the problem this way amounts to a theoretical ploy of meaningless practical value, given the insurmountable difficulties associated with obtaining realistic estimates of these two costs. Would you support this view? Why, or why not? Be specific.

Data from Section 9.3

Transcribed Image Text:

At its basic level and from a purely standard economic perspective, concern for climate change is a resource allocation problem. It deals with how much reduction in current output consumption (usually measured in terms of decrease in GDP) society is willing to sacrifice today to mitigate environmental damage arising from increased GW at some future time. More specifically, at any given point in time, society is confronted with rationing its scarce resources (land, labor, capital, environmental assets, etc.) to satisfy competing ends. Thus, if a society decides to use more of its resources to invest in projects intended to avoid future environmental damage arising from global warming (such as investment in renewa- ble energy resources, carbon sequestration by actions taken to preserve forest ecosystems, higher fuel efficiency standards on passenger cars through legislative mandates, and so on), it means less resources will be available to produce goods and services for current consump- tion (such as food, cars, housing, apparel, furniture settings, public recreational facilities, and so on). Viewed this way, the economics of global warming starts with the recognition of the trade-off that exists between two social costs: (1) GHG damage cost-the cost in the absence of climate policy to mitigate emissions of GHGs, and (2) GHG abatement costs-the costs of GHG emissions reductions as mandated by some specific climate policy. The trade-off between these two costs is quite apparent since a higher abatement cost (i.e., a reduction in greenhouse gas emissions) would be expected to cause lower damage cost, and a lower abate- ment cost would have the opposite effect.