Climate policies will permanently affect the structures of our economies. Fossil-intensive companies and households will be required to adapt, and this will entail certain costs. The public debate is dominated by the view that consistent climate policies are “extremely expensive”. However, this is a distorted perception.
As I explained in a recent article in the journal Ecological Economics, the costs are generally overestimated.1 In any case, an excessively narrow view of the cost argument does not help the issue. Such thinking ignores the diverse economic benefits of climate policy measures, and implicitly builds on misleading assumptions that fail to recognise fundamental economic relationships.
Benefits ignored
An assessment of climate policies should not only look at the costs, but also consider the benefits and gains that arise from the availability and application of new energies and technologies. This also includes learning effects in new markets, which offer important advantages for companies in international competition. The additional benefits in the form of positive health effects thanks to improved air quality are also quantitatively significant. Furthermore, climate policies reduce the risk of write-offs on fossil investments in the decarbonisation process.
It is also worth noting that policy can take individual cost perceptions into account: if revenue from an environmental policy is redistributed back to the population, there is almost no cost to the economy. If money flows into environmentally relevant projects, it is a useful investment. And finally, I have not addressed the primary benefit of climate policies – mitigating climate change helps us to avoid excessive damage to our planet, which after all is the international community’s shared goal.
