The potential negative impact of climate change is greater than had been previously assumed: American economists in particular have shown that the threat posed by climate change in such developed regions as the U.S. and Europe will be more severe than had previously been anticipated. In the last few years, they have been able to define global ecological thresholds. Exceeding those limits will exacerbate already dramatic conditions: Acidification of the oceans and the replacement of rainforests by deserts could accelerate global warming still further. Scientists are thus advising caution: To avoid the gravest risks, the increase in global average temperature over pre-industrial levels should be limited to 2 degrees Celsius (3.6 degrees Fahrenheit). Economists, too, can learn to live with risk-avoidance – if it can be shown that the increase in average temperature can be limited to 2 degrees at an acceptable price.

Fortunately, the price tag for a drastic reduction in greenhouse gas emissions is less than economists had feared. Recent studies by the Potsdam Institute for Climate Impact Research – cited in Stern’s report and discussed in detail in the fourth IPCC report – show that cost estimates for atmospheric stabilization should be corrected downward. Given sufficient technological innovation, less than 1 percent of global economic growth must be sacrificed to achieve the 2 degree goal – meaning that economic development in the 21st century would be slowed by only a few months. Economists’ question as to whether atmospheric stabilization is to our economic advantage can therefore be answered: Ambitious climate protection is necessary and affordable, if we assume the success of policies directed at mobilizing a critical mass of new technology.

If policies designed to avert looming climate change are not only necessary but economically advantageous, then why is international climate diplomacy in crisis? The answer is simple: Any successful climate policy will require, at a minimum, the participation of every political entity on earth. But when everyone is responsible, no one is responsible. Every country – and every company – constantly faces the temptation to resist compliance and let others bear the costs. Here climate policy becomes a moral issue. Climate negotiations to date have made no meaningful progress: There has been no agreement on further steps to reduce greenhouse gas emissions. Nor have negotiations begun with countries such as the U.S., China, and India that have still not pledged to reduce greenhouse gas emissions, yet are and will remain among the major emitters. In the absence of a consensus that all humanity is equally responsible for fending off climate change, there can be no international agreement on measures for atmospheric stabilization.

We are responsible for the welfare of coming generations. They have a right to share in economic growth or to overcome poverty. During industrialization, today’s developed countries were able to exploit the atmosphere at will. In future, those wishing to do so will have to pay. Use of the atmosphere is free of charge: There are no disposal costs associated with CO2, so it is hardly surprising that energy sector innovations aimed at reducing emissions have not gained wide acceptance. Distribution of carbon emissions rights uses political means to establish an upper limit on total emissions. Through emissions trading, the market sets a price corresponding to the emissions’ economic value. Climate protection innovators with access to inexpensive means of reducing emissions can sell their rights on the market at a profit. The more innovation industry contributes, the less the price for emissions will rise. The Potsdam Institute for Climate Impact Research calculates that over the long term, successful transition to a zero-emissions energy system will allow the CO2 price to fall. That outcome, however, will only be possible if all industrial sectors and geographical regions are integrated in a global emissions market: Only universal market for emissions can unleash the research and learning processes that will be necessary to enable a third industrial revolution.