Geoscience Reference
In-Depth Information
strategy assumes that there are only a limited number of potential cliffs
in the damage function, and further that it is not ruinously expensive to
avoid all of them. However, in other situations, we would not go to the
minimax solution if the cliffs are just bumps, or if there are too many
cliffs, or if the cost of avoiding the fi rst cliff is so high that we must choose
among the least bad alternatives.
Under these alternative conditions, the precautionary principle
would not hold. Instead, the analysis would lead to an extra insurance
premium to avoid the tipping element, but not paying all costs to avoid
it. For example, scientists might think that there is a small probability
that the Gulf Stream will reverse course when temperatures rise above
2°C, but that the costs of stopping the reversal are extremely high and
the damages are not catastrophic. In this case, we might add an addi-
tional step to the damage function at 2°C, but this would not necessar-
ily lead to an optimal temperature limit at that level.
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The general point here is that if the damages are uncertain, highly
nonlinear, and cliffl ike in the Climate Casino, then our cost-benefi t
analysis will generally lower the optimal target to provide insurance
against the worst-case outcomes.
CRITIQUES OF APPLYING COST-BENEFIT ANALYSIS TO
CLIMATE CHANGE
Cost-benefi t analysis is often criticized. Skeptics argue that it is in-
appropriate for weighing decisions on climate change. Some of its draw-
backs in this context are technical: there are great uncertainties, and
sometimes the probabilities of different events cannot even be deter-
mined; the costs and benefi ts may accrue to different people or genera-
tions; and there are diffi culties in comparing costs today with benefi ts
in the distant future.
However, climate change also raises important philosophical issues.
For example, in making choices about health impacts, are we ethically
justifi ed in putting a price on human health and life? Perhaps the great-
est diffi culty is that climate-change impacts involve natural systems such
as ecosystems and biodiversity, and our tools are currently inadequate
for valuing these changes.
