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Knowledge Base

Adapting to Climate Change

Aren’t current government policies working to mitigate the effects of climate change?

Current policies aimed at mitigating the effects of climate change are either unlikely to be implemented or unlikely to be successful if implemented.

Regulations to reduce greenhouse gas emissions are the most common policy proposed for reducing global warming. The Paris Agreement is a prominent example. Unsurprisingly, universal adherence to such regulations or agreements is rare. And, even if executed flawlessly, regulations to reduce greenhouse gas emissions are unlikely to have much effect on global temperatures. Additionally, as Terry Anderson wrote in his essay, “Adapt or Be Adept”:

Second, the alternative energy forms necessary to drive the global economy have inherent limits that, for the foreseeable future, will make a transition that eliminates hydrocarbons unlikely. Hydrocarbons are here to stay as a major share of the global energy supply, and therefore far more severe greenhouse gas regulations are unlikely to gain traction.

Perhaps most importantly, politics, not efficiency, drives climate policy. Climate change policies promoted by economists as efficient are rarely adopted. Special interest groups lobby for taxes, subsidies, or regulations that make their products or services more profitable. The result is political outcomes that have little resemblance to theoretical efficiency depicted in economic models.

What are other effective climate policies?

Economists support policies that involve market-like mechanisms that give individuals and corporations incentives to reduce emissions. The two best examples are carbon taxes and cap-and-trade systems. A revenue-neutral carbon tax would automatically encourage consumers and producers to shift toward energy sources that emit less carbon. Watch this video to learn more about how carbon taxes can reduce emissions.

Another efficient policy favored by economists is called cap-and-trade. Here, Terry Anderson explains cap-and-trade systems:

Under cap and trade, the government places a cap on carbon emissions, allocates shares in the cap to carbon emitters, and allows the shares to be traded. This creates a market in the cap, the price of which is determined by willing buyers and willing sellers. As with a carbon tax, the price of the cap will affect producer and consumer behavior, but the quantity and its allocation are set through a political process, not through market forces.