Climate Change Economics: Bridging the Gap Between Scientific Urgency and Policy Inaction

The global scientific consensus regarding the urgent threat from climate change is arguably at odds with the far from substantial and fragmented nature of global policy responses. The paper examines the economic reasons for the absence of coordinated policy response focused on climate change, from basic market failure with respect to negative externalities, to the political economy of vested interests and the challenges of international coordination. The paper critically reviews the main economic tools to promote and embed climate change policy, including carbon pricing tools and green subsidies, and assesses how they perform in a real-world context. The paper argues that the gap between scientific recommendations and political realities can be addressed with a new generation of integrated policy tools that are economically efficient, politically acceptable and socially equitable. The paper ends with several suggestions for policy makers to align long-term environmental objectives with short-term economic incentives to enable a global response to climate change that is both stronger and quicker.