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Stern on Stern « Previous | |Next »
November 2, 2006

This paragraph is from Sir Nicholas Stern's presentation and it challenges those neo-liberals who want to let market forces work on their own.

The science has been our starting point. It shapes the economics.The science tells us that GHG emissions are an externality; in otherwords, our emissions affect the lives of others. When people do not pay for the consequences of their actions we have market failure. This is the greatest market failure the world has seen. It is an externality that goes beyond those of ordinary congestion or pollution, although many of the same economic principles apply for its analysis. This externality is different in 4 key ways that shape the whole policy story of a rational response. It is: global; long term; involves risks and uncertainties; and potentially involves major and irreversible change.

Thosse who argue the market economy can adapt to shocks, so that we don’t need to worry about a changing climate because the adaptation by thge market will be efficient and painless, overlook the problem of the externality of greenhouse gas emissions. That needs to be priced before industry will invest in low emission technology, as this investment will increase the price of power.

Without a pricing the externality it is economically rational for industry not to invest in low emission technology.

| Posted by Gary Sauer-Thompson at 2:33 PM | | Comments (0)