Some Basic Economics of Climate Change

Abstract

Climate change is characterized by deep structural uncertainty in the science cou- pled with an economic inability to evaluate meaningfully the welfare losses from high temperature changes. The probability of a disastrous collapse of planetary welfare from too much CO2 is non-negligible, even if this low probability is not objectively knowable. This paper attempts to explain (in not excessively technical language) some of the most basic issues in modeling the economics of catastrophic climate change. The paper builds to a tentative conclusion that, no matter what else is done realis- tically to slow CO2 buildups, economic analysis lends some support to undertaking serious research now into the prospects of ìfast geoengineering preparednessîñas a state-contingent emergency option o§ering at least the possibility of knocking down catastrophic temperatures rapidly.