Thoughts on economics and liberty

Cost-benefit analysis of CO2 and climate change

In 2011 I had asked for a cost benefit analysis of CO2. 

As far as I can gather no such official CBA has been conducted so far. I have therefore asked IPCC today for a global CO2 CBA

I’m going to write about this in more detail separately. This post compiles info that’s available so far on this topic:

Global Warming, Cost-Benefit Analysis, and The End of Doom – Bryan Caplan  – SUPERB summary

Estimating the Benefits from Carbon Dioxide Emissions Reductions

BOOK: Warming the world: economic models of global warming – William D. Nordhaus, Joseph Boyer

BOOK: A Question of Balance: Weighing the Options on Global Warming Policies – William D. Nordhaus

This is a recently released EIGHTH chapter from Heartland Institute’s book, Climate Change Reconsidered II: Fossil Fuels

There’s some work by Ross Garnaut, some by Stern.

Will keep adding to this post as I find time.

NOTES FROM  Warming the world: economic models of global warming – William D. Nordhaus

Understanding the economic impacts of climate change continues to be the thorniest issue in climate-change economics.

We reiterate that the damage function, particularly the response of developing countries and natural ecosystems to climate change, is poorly understood at
present. An important open issue is the possibility of abrupt climate change; this is a central concern because, whereas scientists have improved their understanding of many elements of climate change, the potential for abrupt or catastrophic climatic change, for which precise mechanisms and probabilities have not been determined, cannot currently be ruled out.

A related issue is that this book abstracts from issues of uncertainty, in which risk aversion and the possibility of learning may modify the stringency and timing of control strategies. Additionally, the calculations omit the interactions between climate change and other potential market failures, such as air pollution, taxes, and research and development, which might reinforce or weaken the logic behind greenhouse-gas reduction or carbon taxes. Although the model assumes substantial future technological change—both overall and carbon saving—it omits endogenous technological change.



The IPCC’s 2018 report, “Global Warming of 1.5 ºC”, does not even attempt to justify its policy goals in a cost/benefit framework. Rather, it takes the 1.5°C target as a politically “given” constraint and then discusses the pros and cons of various mechanisms to achieve it.

William Nordhaus’s economic model for the climate shows that the UN’s target would make humanity poorer than doing nothing at all about climate change. – source



one of the general findings there is that climate change is a problem and climate change would reduce human welfare but that welfare loss is actually not that great. And if you just believe the central estimates and just look at the global average then you would find that a century worth of climate change is about equal to losing a year’s worth of economic growth in terms of human welfare. It’s another very big impact and certainly does not make climate change the biggest problem of humankind as some people are trying to convince us of. [Source]

Sanjeev Sabhlok

View more posts from this author

Leave a Reply

Your email address will not be published. Required fields are marked *