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Climate Change and Economic Theory -- A Neo-Ricardian Approach to the Economy of Climate Protection

Received: 5 April 2023     Accepted: 24 April 2023     Published: 10 May 2023
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Abstract

The Stern Review (2007) is the most comprehensive work to date on anthropogenic climate change from an economic perspective. It caused a general uproar because for the first time a renowned economist recommended the rapid implementation of expensive measures against climate change because hesitation would be even more expensive in the future. Nonetheless, the Stern Review moves in the familiar orbit of neoclassical theory, which supplanted classical theory (Smith, Ricardo, Marx) towards the end of the 19th century and is still dominant in academia today. Neoclassicism has made many contributions to environmental economics, but it seems to fail in the face of climate change. Ecological economics, which has been on the rise since the 1980s and works with the concept of entropy borrowed from physics, has not made any progress here either. If one understands environmental problems as disturbances of natural cycles (of water, carbon, nitrogen, etc.), then in dealing with them one will give preference to an economic theory that also regards the economic process as a material cycle. Piero Sraffa's theory, which follows on from the classical theory, is of this kind. It makes it possible to integrate the carbon cycle into an economic model that includes trading in emission rights with the participation of CO2 sinks. The model shows that this trade does not generate extra profits, but cuts the profits of CO2 emitters. It also shows that all CO2-intensive products would have to be much more expensive in a CO2-neutral economy than they are today.

Published in International Journal of Economy, Energy and Environment (Volume 8, Issue 1)
DOI 10.11648/j.ijeee.20230801.13
Page(s) 12-16
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2023. Published by Science Publishing Group

Keywords

Climate Change, Future Generations, Carbon Cycle, Emission Rights, Sraffa, Circular Economy

References
[1] Sraffa, Piero. Production of Commodities by Means of Commodities. Cambridge University Press 1960.
[2] Stern, Nicholas. The Economics of Climate Change. The Stern Review. Cambridge University Press 2007, p. 31.
[3] Boehm-Bawerk, Eugen. Kapital und Kapitalzins. Positive Theorie des Kapitals. Vienna 1921. There one reads: "Present goods are as a general rule worth more than future goods of the same kind and number."
[4] Buchholz, Wolfgang und Schumacher, J. Die Wahl der Diskontrate bei der Bewertung von Kosten und Nutzen der Klimapolitik (in German). In: Weimann, J. (Hrsg.). Jahrbuch Ökologische Ökonomik 6, Diskurs Klimapolitik, Marburg 2009, S. 1-33.
[5] Nordhaus, William D. A review of the Stern Review on the Economics of Climate Change. J. of Economic Literature 45 (2007), 686-702.
[6] Stern, Nicholas. The Economics of Climate Change. The Stern Review. Cambridge University Press 2007, p. 51.
[7] Portney, Paul R. Applicability of Cost-Benefit Analysis to Climate Change. In: Nordhaus, William D. (ed.). Economics and Policy Issues in Climate Change. Washington: Resources for the Future 1998.
[8] Toth, Ferenc L. Comments. In: Nordhaus, loc. cit., pp. 129-135.
[9] Samuelson, Paul A. and Nordhaus, W. D. Economics, 14th edition, 1992, p. 2.
[10] Stern, Nicholas. The Economics of Climate Change. The Stern Review. Cambridge University Press 2007, p. 272.
[11] Hänggi, Marcel. Ausgepowert. Das Ende des Ölzeitalters als Chance (in German). Zürich 2011, p. 261.
[12] Stern, Nicholas. The Economics of Climate Change. The Stern Review. Cambridge University Press 2007, p. 274.
[13] Wunder, Sven and Montserrat, Alban. Decentralized payments for environmental services: the cases of Pimampiro and Profafor in Ecuador. Ecological Economics 65 (2008), 685-698.
[14] Marx, Karl. Das Kapital, Vol. 2. (in German, first edition Hamburg 1885) In: Marx-Engels-Werke, vol. 24, Berlin 1975, p. 391 f.
[15] Pasinetti, Luigi L. Lectures on the Theory of Production. London: The MacMillan Press 1977.
Cite This Article
  • APA Style

    Helmut Knolle. (2023). Climate Change and Economic Theory -- A Neo-Ricardian Approach to the Economy of Climate Protection. International Journal of Economy, Energy and Environment, 8(1), 12-16. https://doi.org/10.11648/j.ijeee.20230801.13

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    ACS Style

    Helmut Knolle. Climate Change and Economic Theory -- A Neo-Ricardian Approach to the Economy of Climate Protection. Int. J. Econ. Energy Environ. 2023, 8(1), 12-16. doi: 10.11648/j.ijeee.20230801.13

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    AMA Style

    Helmut Knolle. Climate Change and Economic Theory -- A Neo-Ricardian Approach to the Economy of Climate Protection. Int J Econ Energy Environ. 2023;8(1):12-16. doi: 10.11648/j.ijeee.20230801.13

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  • @article{10.11648/j.ijeee.20230801.13,
      author = {Helmut Knolle},
      title = {Climate Change and Economic Theory -- A Neo-Ricardian Approach to the Economy of Climate Protection},
      journal = {International Journal of Economy, Energy and Environment},
      volume = {8},
      number = {1},
      pages = {12-16},
      doi = {10.11648/j.ijeee.20230801.13},
      url = {https://doi.org/10.11648/j.ijeee.20230801.13},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijeee.20230801.13},
      abstract = {The Stern Review (2007) is the most comprehensive work to date on anthropogenic climate change from an economic perspective. It caused a general uproar because for the first time a renowned economist recommended the rapid implementation of expensive measures against climate change because hesitation would be even more expensive in the future. Nonetheless, the Stern Review moves in the familiar orbit of neoclassical theory, which supplanted classical theory (Smith, Ricardo, Marx) towards the end of the 19th century and is still dominant in academia today. Neoclassicism has made many contributions to environmental economics, but it seems to fail in the face of climate change. Ecological economics, which has been on the rise since the 1980s and works with the concept of entropy borrowed from physics, has not made any progress here either. If one understands environmental problems as disturbances of natural cycles (of water, carbon, nitrogen, etc.), then in dealing with them one will give preference to an economic theory that also regards the economic process as a material cycle. Piero Sraffa's theory, which follows on from the classical theory, is of this kind. It makes it possible to integrate the carbon cycle into an economic model that includes trading in emission rights with the participation of CO2 sinks. The model shows that this trade does not generate extra profits, but cuts the profits of CO2 emitters. It also shows that all CO2-intensive products would have to be much more expensive in a CO2-neutral economy than they are today.},
     year = {2023}
    }
    

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Author Information
  • Retired from Department of Social and Preventive Medicine, University of Berne, Berne, Switzerland

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