I find it interesting that green activists and their political allies uniformly favor dramatic and draconian action to avert climate change. Serious policy analysts are different; they generally favor less dramatic action applied over the long term. What explains this difference?

Perhaps it’s because the analysts understand long-term adjustments are much cheaper and easier than rapid ones, especially for the poor. They know that like other environmental problems, climate change is complex. In many important areas subtle links between cause and effect are hard to discern. Hence, the most effective policy response is not immediately apparent. And the cost of getting it wrong is high in financial, ecological, and human terms.

I saw this again during a panel discussion on our energy future. Joining me was professor John Parsons, Executive Director of MIT’s Joint Program on the Science and Policy of Global Change. My cospeaker and I agreed on a wide range of energy-related issues. Here’s a sample.

Energy Is the “Master Resource”

The tremendous strides in human and environmental progress since the Industrial Revolution are largely due to our ability to harness affordable and reliable supplies of energy. Energy indeed “makes civilization possible.”

Over the next fifty years the world’s developing nations will seek to emulate the West’s material success. Their leaders know that improving the quality of life for their citizens requires more, not less, energy consumption.

Despite ratifying the Kyoto Protocol, the European Union will miss its emissions reduction target of 8 percent below 1990 levels by 2012. CO2 emissions for the 15 original EU states increased an average of 9 percent between 2000 and 2004. By comparison, in the U.S. (which has not ratified the Kyoto Protocol) CO2 emissions increased only 1.7 percent during the same time period. But even if rich countries cut emissions, it won’t matter unless China and India do. Their emissions will swamp our progress.

Uncertainty About Climate Change

We know the climate is warming. From that empirical assertion we move onto much shakier ground. Despite assurances to the contrary from Al Gore, there are large uncertainties regarding the physical processes driving climate change. (Google “uncertainty + climate change” for a sample.)

Since the costs of dramatic action will be borne now, with the benefits accruing in the future, policy makers face this question: How much resources should we spend now to avert uncertain and distant risks?

If the downside risk is big, we should spend a lot. We hedge against uncertainty all the time. For example, we purchase home insurance not because we think our home is likely to catch fire tomorrow, but because, if it did, the result would be disastrous. And investors often diversify portfolios to reduce risks in financial markets. What might a climate “insurance” policy look like?

Carbon Pricing

An essential principle for crafting effective public policy is that, to the greatest extent feasible, individuals should bear the costs of their actions. Currently, the price of fossil fuels does not reflect their social costs. One solution is to place a “green tax” on our energy consumption, e.g., a $3 per gallon tax on gasoline. This gives consumers incentives to reduce consumption. Producers would have incentives to bring innovative and climate-friendly alternatives to market.

Another option is carbon emissions trading, with a cap on global CO2 emissions. Companies are then given emission credits, allowing them to emit a specific amount of CO2. Companies that emit beyond their allowances must buy credits from those who emit less. (This worked well for greatly reducing lead and SO2 in our air.) The European Union has implemented just such an approach.

A different approach involves the interesting question of geoengineering, i.e., our ability to manipulate the global climate through, say, space-based mirrors or carbon from jet exhaust. This is a serious area of research and raises important questions and possibilities. Among them, what temperature do we want and who decides? Do we let the Maldive Islanders decide, since future sea level rise could submerge their homes? The Russians might prefer some moderate warming, to increase agriculture in Siberia and provide ice-free ports. I’ll explore this topic further in a future column.