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The Role of Economic Analysis in Combating
Climate Change
Joachim Wündisch
This paper is concerned with the appropriate role of economic analysis in the context of the
climate change debate. It seeks to offer a careful evaluation of the economists’ tools and the
underlying philosophy of economics in order to build a limited defense of economic analysis
against common criticisms voiced by philosophers.
1. Introduction
Anthropogenic climate change is one of humanity’s most important and urgent challenges. If
we fail to intervene with conviction, anthropogenic climate change will radically reshape our
biosphere wreaking havoc on human and animal welfare. While lagged effects make reversing
or even halting climate change unattainable for now, there are feasible strategies to slow
climate change and to avert catastrophe. The most salient but also one of the most costly of
these strategies is a significant reduction of global CO 2 emissions.
Neither the reality of climate change nor its effects are disputed by credible sources. However,
the question of how to evaluate the effects of climate change as well as the question of how
and to what extent to reduce CO 2 emissions is the subject of serious debate. Due to the
success of economists in influencing policy debates, the tools of their trade are ever present in
discussions of public policy. Their critics, though, claim that the contributions economists can
make to public policy debates are vastly overrated. Specifically, some claim that underlying
philosophical perspectives need to be more carefully considered when making public policy
decisions in general and decisions about combating climate change in particular.
This paper is concerned with the appropriate role of economic analysis in the context of the
climate change debate. It seeks to offer a careful evaluation of the economists’ tools and the
underlying philosophy of economics in order to build a limited defense of economic analysis
against common criticisms voiced by philosophers. Toward this end section two introduces a
particularly pointed statement of these criticisms and summarizes them. Sections three, four,
and five defend economic analyses against these criticisms before section six concludes.
2. Management Approaches to Climate Change
In his article “Ethics, Public Policy, and Global Warming” the influential environmental
ethicist Dale Jamieson delivers a scathing critique of what he calls management approaches.
These management approaches are said to be based on
[m]anagement techniques mainly […] drawn from neoclassical economic theory and
[…] directed toward manipulating behavior by controlling economic incentives through
taxes, regulations, and subsidies. (Jamieson 1992: 142)
Examples of these management approaches within the climate change debate are taxes on
CO 2 emissions, outright bans on particularly wasteful technologies such as the incandescent