Effective Policy for Combatting Global Warming- The Climate Casino

This is the first post based on the information provided in William Nordhaus’ The Climate Casino. I picked this book up at the American Economic Association’s annual conference in Atlanta, Georgia two years ago, and it sparked my passion for the climate and renewables.

Nordhaus, W. D. (2013). The Climate Casino. New Haven: Yale University Press.

A quick read loaded with information that’ll get you ready for lots of discussion on the climate and what we can do collectively to save it.

It’s evident that current policies for CO2 emissions controls aren’t working- 2019 saw global CO2 emissions at around 33 Gigatonnes. https://www.iea.org/articles/global-co2-emissions-in-2019

2020 will see a slight drop in global emissions of CO2 overall due to economic inactivity resulting from the Coronavirus- not from any new policy.

For now, the majority of CO2 emissions remains unchecked, resulting in lack of accountaibility for the major generators. Nordhaus asserts that policy on CO2 emissions is one of the most effective ways to combat the problem, and the approach must make generation of CO2 more expensive for the major offenders.

For any policy to be effective, it must raise the market price of CO2 and other GHG emissions. Putting a price on emissions corrects for the underpricing of the externality in the marketplace.

Nordhaus, 6

An increase in the market price of CO2 and GHG emissions make it more expensive for companies to continue with operations that release pollutants, and will create price signals for consumers- carbon-heavy products will cost more and be less prevalent. Additionally, it will encourage investors to bet on technologies that are more sustainable, as these will be more profitable in the future as carbon prices pick up.

To slow climate change, the incentive must be for everyone- millions of firms and billions of people spending trillions of dollars- to increasingly replace their fossil-fuel-driven consumption with low-carbon activities.

Nordhaus, 6

Below is an article detailing several countries’ attempts to control their carbon emissions, to varying degrees of success and failure: https://www.nytimes.com/interactive/2019/04/02/climate/pricing-carbon-emissions.html

Many, including Australia with lenient plans, are employing a cap and trade program (though Australia was not, when this article was written, on track to meet their carbon goals). To clarify, cap and trade means that there is a set amount of emissions that a country is allowed to release each year, and by using a system of credits wtih other countries, it is allowed to sell un-used carbon emission credits so that other countries can purchase the right to emit more than intended. Basically, countries will have to purchase credits in order to emit more, and will profit from not reaching their carbon cap.