24 Lessons for mitigation from the foundations of monetary policy in the United States

Many analysts, (including Pizer [Chapter 25], Keller et al. [Chapter 28], Webster [Chapter 29] and Toth [Chapter 30] in this volume, as well as others like Nordhaus and Popp [1997], Tol [1998], Lempert and Schlesinger [2000], Keller et al. [2004] and Yohe et al. [2004]) have begun to frame the debate on climate change mitigation policy in terms of reducing the risk of intolerable impacts. In their own ways, all of these researchers have begun the search for robust strategies that are designed to take advantage of new understanding of the climate systems as it evolves – an approach that is easily motivated by concerns about the possibility of abrupt climate change summarized by, among others, Alley et al. (2002). These concerns take on increased importance when read in the light of recent surveys which suggest that the magnitude of climate impacts (see, for example, Smith and Hitz [2003]) and/or the likelihood of abrupt change (IPCC, 2001; Schneider, 2003; Schlesinger et al., 2005) could increase dramatically if global mean temperatures rose more than 2 or 3 C above pre-industrial levels. Neither of these suggestions can be advanced with high confidence, of course, but that is the point. Uncertainty about the future in a risk-management context becomes the fundamental reason to contemplate action in the near term even if such action cannot guarantee a positive benefit–cost outcome either in all states of nature or in expected value. Notwithstanding the efforts of these and other scholars to reflect these sources of concern in their explorations of nearterm policy intervention, the call for a risk-management approach has fallen on remarkably deaf ears. Indeed, uncertainty is frequently used by many in the United States policy community and others in the consulting business as the fundamental reason not to act in the near term. For evidence of this tack, consider the policy stance of the Bush Administration that was introduced in 2002. In announcing his take on the climate issue, the President emphasized that “the policy challenge is to act in a serious and sensible way, given our knowledge. While scientific uncertainties remain, we can begin now to address the factors that contribute to climate change” (www.whitehouse.gov/ new/releases/2002/02/climate change.html; my emphasis). Indeed, the New York Times reported on June 8th, 2005 that Philip Cooney, the White House Council on Environmental Quality, repeatedly inserted references to “significant and fundamental” uncertainties into official documents that describe the state of climate science even though he has no formal scientific training (Revkin, 2005). In large measure responding to concerns about uncertainty among his closest advisers, the President’s policy called for more study, for voluntary restraint (by those motivated to reduce their own emissions even though others are not), and for the development of alternatives to current energy-use technologies (because reducing energy dependence is otherwise a good idea even though promising advancements face enormous difficulty penetrating the marketplace). If productive dialogue is to resume, advocates of risk-based near-term climate policy will have to express its value in terms that policymakers will understand and accept. The case must be made, in other words, that a risk-management approach to near-term climate policy would be nothing more than the application of already accepted policy-analysis tools and principles to a new arena. This paper tries to contribute to this process by turning for support to recent descriptions of how