Page:The Cost of Delaying Action to Stem Climate Change.pdf/8

 scales—if an ice sheet melts, it cannot be reconstituted—and they could potentially have massive global consequences and costs. For many of these events, there is thought to be a “tipping point,” for example a temperature threshold, beyond which the transition to the new state becomes inevitable, but the values or locations of these tipping points are typically unknown.

Section III of this report examines the implications of these possible climate-related catastrophes for climate policy. Research on the economic and policy implications of such threats is relatively recent. As detailed in Section III, a conclusion that clearly emerges from this young but active literature is that the threat of a climate catastrophe, potentially triggered by crossing an unknown tipping point, implies erring on the side of prudence today. Accordingly, in a phrase used by Weitzman (2009, 2012), Pindyck (2011), and others, climate policy can be thought of as “climate insurance.” The logic here is that of risk management, in which one acts now to reduce the chances of worst-case outcomes in the future. Here, too, there is a cost to delay: the longer emission reductions are postponed, the greater are atmospheric concentrations of GHGs, and the greater is the risk arising from delay.

Other Costs of Delay and Benefits of Acting Now
An additional benefit of adopting meaningful mitigation policies now is that doing so sends a strong signal to the market to spur the investments that will reduce mitigation costs in the future. An argument sometimes made is that mitigation policies should be postponed until new low-carbon technologies become available. Indeed, ongoing technological progress has dramatically improved productivity and welfare in the United States because of vast inventions and process improvements in the private sector (see for example CEA 2014, Chapter 6). The private sector invests in research and development, and especially in process improvements, because those technological advances reap private rewards. But low-carbon technologies, and environmental technologies more generally, face a unique barrier: their benefits – the reduction in global impacts of climate change – accrue to everyone and not just to the developer or adopter of such technologies. Thus private sector investment in low-carbon technologies requires confidence that those investments, if successful, will pay off, that is, the private sector needs to have confidence that there will be a market for low-carbon technologies now and in the future. Public policies that set out a clear and ongoing mitigation path provide that confidence. Simply waiting for a technological solution, but not providing any reason for the private sector to create that solution, is not an effective policy. Although public financing of basic research is warranted because many of the benefits of basic research cannot be privately appropriated, many of the productivity improvements and cost reductions seen in new technologies come from incremental advances and process improvements that only arise through private-sector experience producing the product and learning-by-doing. These advances are protected through the patent system and as trade secrets, but those advances will only transpire if it is clear that they will have current and