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A Question of Balance

A Question of Balance: Weighing the Options on Global Warming Policies

William Nordhaus
Copyright Date: 2008
Published by: Yale University Press
Pages: 256
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  • Book Info
    A Question of Balance
    Book Description:

    As scientific and observational evidence on global warming piles up every day, questions of economic policy in this central environmental topic have taken center stage. But as author and prominent Yale economist William Nordhaus observes, the issues involved in understanding global warming and slowing its harmful effects are complex and cross disciplinary boundaries. For example, ecologists see global warming as a threat to ecosystems, utilities as a debit to their balance sheets, and farmers as a hazard to their livelihoods.

    In this important work, William Nordhaus integrates the entire spectrum of economic and scientific research to weigh the costs of reducing emissions against the benefits of reducing the long-run damages from global warming. The book offers one of the most extensive analyses of the economic and environmental dynamics of greenhouse-gas emissions and climate change and provides the tools to evaluate alternative approaches to slowing global warming. The author emphasizes the need to establish effective mechanisms, such as carbon taxes, to harness markets and harmonize the efforts of different countries. This book not only will shape discussion of one the world's most pressing problems but will provide the rationales and methods for achieving widespread agreement on our next best move in alleviating global warming.

    eISBN: 978-0-300-16598-2
    Subjects: Environmental Science, Business

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. Acknowledgments
    (pp. ix-x)
  4. Introduction
    (pp. xi-xiv)

    The issues involved in understanding global warming and taking actions to slow its harmful impacts are the major environmental challenge of the modern age. Global warming poses a unique mix of problems that arise from the fact that global warming is a global public good, is likely to be costly to slow or prevent, has daunting scientific and economic uncertainties, and will cast a shadow over the globe for decades, perhaps even centuries, to come.

    The challenge of coping with global warming is particularly difficult because it spans many disciplines and parts of society. Ecologists may see it as a...

  5. I Summary for the Concerned Citizen
    (pp. 1-29)

    Often, technical studies of global warming begin with an executive summary for policymakers. Instead, I would like to provide a summary for the audience of concerned citizens. The points that follow are prepared for both scientists and nonspecialists who would like a succinct statement of what economics, or at least the economics in this book, concludes about the dilemmas posed by global warming.

    Global warming has taken center stage in the international environmental arena during the past decade. Concerned and disinterested analysts across the entire spectrum of economic and scientific research take the prospects for a warmer world seriously. A...

  6. II Background and Description of the DICE Model
    (pp. 30-37)

    Before getting into modeling details, it will be useful to sketch the scientific basis for concerns about global warming, as reviewed by the IPCC’sClimate Change 2007: The Physical Science Basis(IPCC 2007b). As a result of the buildup of atmospheric greenhouse gases (GHGs), it is expected that significant climate changes will occur in the coming decades and beyond. The major industrial GHGs are carbon dioxide (CO₂), methane, ozone, nitrous oxides, and chlorofluorocarbons (CFCs).

    The most important GHG is CO₂, whose emissions have risen rapidly in recent decades. The atmospheric concentration of carbon dioxide of 380 parts per million (ppm)...

  7. III Derivation of the Equations of the DICE-2007 Model
    (pp. 38-64)

    This chapter presents the mathematical structure of the DICE-2007 model. We begin with the objective function, next present the economic relationships, and end with the geophysical equations. The major changes since the last generation of RICE-DICE models are described in the last part of the chapter. The equations of the DICE-2007 model are listed in the Appendix. We will refer to the Appendix equations as we proceed with this discussion.

    Before beginning this technical description, we should note that our research was undertaken primarily on the basis of the Third Assessment Reports of the IPCC but before the landmark Fourth...

  8. IV Alternative Policies for Global Warming
    (pp. 65-79)

    The major advantage of integrated assessment approaches such as the DICE model is that they can investigate alternative policies in a consistent and comprehensive framework. The costs and impacts of alternative policies on the environment and the economy can be analyzed as a package. This allows us to understand the trade-offs involved in a more precise fashion.

    There are many potential approaches to climate-change policy. In this book, we have organized these into the major policies shown in Table 4-1. The first or baseline policy is a world in which there are no controls for two and one-half centuries. In...

  9. V Results of the DICE-2007 Model Runs
    (pp. 80-115)

    We now describe the major result of the DICE-2007 model runs. At the outset, it must be emphasized that models such as DICE are primarily tools for understanding the behavior of complex systems. They are not truth machines. The results convey a spurious precision that does not accurately reflect the modeling, behavioral, and measurement errors and uncertainties. At the same time, integrated assessment models provide an essential discipline by ensuring that assumptions and conclusions are internally consistent and that the consequences of alternative assumptions or policies can be mapped out.

    We first summarize the overall results for the alternative policies...

  10. VI The Economics of Participation
    (pp. 116-122)

    One of the important features of public goods like global warming is that there are widely disparate incentives to participate in measures to mitigate the damages. The differences reflect different perceptions of damages, income levels, political structures, environmental attitudes, and country sizes. For example, Russia may believe that it will benefit from at least limited warming, while India may believe that it will be significantly harmed. The structures of the Framework Convention on Climate Change (which requires only the participation of high-income countries) and the Kyoto Protocol (which excludes major developing countries in principle and the United States in practice)...

  11. VII Dealing with Uncertainty in Climate-Change Policy
    (pp. 123-147)

    Behavioral studies have repeatedly shown that people overestimate their confidence in their knowledge of the world. Not only do people underestimate the range of possible outcomes, but they also often forget that there are forces that they have not thought about, or do not know about, that will upset their plans and expectations. The overconfidence problem can easily arise in analytical studies, such as computerized approaches like the DICE model, where the results are shown with great precision and with many significant digits. How confident can we be in the results of our modeling? What are the implications for climate-change...

  12. VIII The Many Advantages of Carbon Taxes
    (pp. 148-164)

    In dealing with global public goods like global warming, it is necessary to reach through governments to the multitude of firms and consumers who make the vast number of decisions that affect the ultimate outcome. There are only two mechanisms that can realistically be employed: quantitative limits through government fiat and regulation, and price-based approaches through fees, subsidies, or taxes.¹ This chapter addresses the major differences between the two and explains why price-based approaches have major advantages over quantitative limits.

    In the global-warming context, quantitative limits set global targets on the time path of the greenhouse-gas emissions of different countries....

  13. IX An Alternative Perspective: The Stern Review
    (pp. 165-191)

    In November 2006, the British government presented a comprehensive new study:Stern Review on the Economics of Climate Change(hereafter theStern Review).¹ It painted a dark picture for the globe: “[T]heReviewestimates that if we don’t act, the overall costs and risks of climate change will be equivalent to losing at least 5% of global GDP each year, now and forever. If a wider range of risks and impacts is taken into account, the estimates of damage could rise to 20% of GDP or more. . . . Our actions now and over the coming decades could create...

  14. X Summary and Conclusions
    (pp. 192-204)

    This book presents the results of the DICE-2007 model, which is a complete revision of earlier models of the economics of global warming. The model is a globally aggregated model that incorporates simplified representations of the major elements involved in analyzing the problems associated with climate change. The major feature of the DICE model is that it allows us to analyze in a simplified and transparent fashion the economic and environmental impacts of alternative policies, including one with no controls, an economic optimum, and ones targeted on climatic constraints, as well as ones that derive from current policies such as...

  15. Appendix: Equations of the DICE-2007 Model
    (pp. 205-210)
  16. Notes
    (pp. 211-218)
  17. References
    (pp. 219-226)
  18. Index
    (pp. 227-234)