A Comparative Study, Volume 2
The Fondazione Eni Enrico Mattei series on Economics, the Environment and Sustainable Development
Edited by Anil Markandya and Marialuisa Tamborra
Chapter 14: Marginal Cost Estimates of Greenhouse Gas Emissions
* Richard S.J. Tol, Samuel Fankhauser, Onno Kuik and Joel B. Smith 14.1 INTRODUCTION Many economic activities generate waste in the form of greenhouse gases that are emitted into the atmosphere. The build-up of greenhouse gases in the atmosphere is believed to aﬀect the world’s future climate. Climate change continues to ﬁgure prominently as one of the major environmental concerns for the future. Some people argue climate change is a problem because it could cause unacceptable hardship for particularly vulnerable populations (for example, those living on small island states). Others are concerned about the potential threat to certain unique and valuable systems (such as coral reefs). Still others worry that climate change will increase the probability of large-scale climate instabilities (for example, a shutdown of the Gulf Stream), and will have costly impacts on economies through ﬂoods and storms. A fourth group wonders about the total (or aggregate) impacts of climate change. They argue that emission reduction is costly too, that balancing abatement costs against the damages avoided from climate change is a way of determining what action should be taken (cf. Smith et al., 2001). The subject of this chapter – the marginal costs of climate change – particularly addresses the need for and problems in calculating aggregate costs of climate change. Economic activities that emit greenhouse gases generate intertemporal externalities. The future damage of current emissions should be accounted for in a system of green accounts. A key challenge when assessing the impacts of climate change is synthesis, that is,...
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