ECONOMICS OF CLIMATE CHANGE
In 2006, British economist Lord Nicholas Stern claimed that ‘Climate change is the greatest market failure the world has seen’ (The Stern Review, Cambridge University Press, 2007). In his 700-page review on the economics of climate change, Lord Stern paints an apocalyptic picture of a planet that fails to curb global greenhouse gas (GHG) emissions. The fundamental tenet of Stern’s theory is that carbon and other GHGs are negative externalities: costs that are not reflected in the price of a good or service which are borne by society rather than the individual or firm. In the case of climate change, every citizen of the Earth – current and future generations – will share the cost of global warming.
Negative externalities ...
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