William D. Nordhaus reviews Climate Shock: The Economic Consequences of a Hotter Planet, by Gernot Wagner and Martin L. Weitzman: Climate change has become the premier environmental issue facing the globe. Carbon dioxide (CO2) emissions continue to grow and accumulate in the atmosphere. The average global temperature in 2014 was the highest recorded over the last century and a half. Most scientists say that climate change is a “very serious problem.” Yet virtually no progress has been made in convincing the general public of its serious nature, nor have significant steps been taken to curb emissions and slow warming. Why has progress been so halting?
The risks of a warming world and potential policies to deal with these risks are the subject of a short book by Gernot Wagner and Martin Weitzman. Wagner is a public policy specialist and lead senior economist at the Environmental Defense Fund and has written widely on energy and climate change. Weitzman is one of the leading economic theorists of our day, having made fundamental contributions to environmental accounting, the relative merits of price and quantity regulation, measurement of species extinction, and in an earlier era the economics of central planning and the Soviet Union.
Their book on climate change is a witty, far-ranging, and literate set of observations, but — unlike many books on climate change — it is always informed by a deep understanding of the complexities of economics and particularly the difficulties of reaching international environmental agreements. While the entire book is worth careful study, its singular contributions are in three areas: the discussions of how nations may “free-ride” on the decisions of others, the ultimate curse on international climate policies; the uncertainties surrounding both climate change and its consequences; and the particular perils of geoengineering to reverse carbon-induced climate change. None of these subjects is well covered in most books on climate change, so I will concentrate on them in this review. [Continue reading…]