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November 2008

Financial panic—the most reassuring news in weeks

Rachel Ilana Block's picture

There’s been a lot of worrying news lately – particularly, news that looks bad for achieving global multilateral action on climate change.  The collapse of the Doha trade negotiations in July has been interpreted by many – including World Bank President Robert Zoellick and former EU Trade Commissioner Peter Mandelson – as steepening the “uphill struggle” of the UNFCCC negotiations.

More recently, the unfolding global financial crisis is weakening optimism about tackling climate change.  The financial crisis is dominating headlines and bumping climate change ever lower on the international agenda.  The metaphors abound, as climate change “takes a back seat” and is “left out in the cold.”

Bailing out the Earth, now!

Ricardo Fuentes's picture
Bailing out the Earth, now!
   Photo © Curt Carnemark/World Bank

The current financial crisis is humbling every participant in the international financial system. Even Alan Greenspan acknowledged he was wrong in his blind confidence in the markets and financial innovation.

This crisis provides a cautionary tale of what could happen if we do not act urgently to limit the change in the earth’s climate. The current meltdown of the financial system is often portrayed as a massive regulation failure. Another regulation misstep—unmitigated climate change—could lead us to the actual meltdown of part of the earth’s climate system. This would make this financial crisis seem like a day on the beach.

Green happiness?

Andrea Liverani's picture

A recent paper by Cohen and Vandenbergh explores the relationship between climate change and consumption by building on emerging work on the determinants of subjective well being. According to an increasing body of 'happiness research',  wealth has decreasing marginal returns, which  means that above certain levels of income, people are willing to trade some of their monetary compensation for more “leisure” and time for themselves. The implications are that public policy should aim at cutting working hours and increase public funding to culture, entertainment and “well being” activities. This would help increase public welfare without increasing consumption, thus helping reduce emissions. In the authors' own words: