Without doubt, we can ill afford a sustained decarbonisation at such high economic costs. Climate policy – and the accompanying economic policies – must do better than that, better than compromising the livelihoods of so many people and hitting the world’s poorest particularly hard.
At the heart of the problem is a negative externality: while the burning of fossil fuels provides the originator with a beneﬁt, it harms everyone else, even generations yet to come. Such social costs are not reﬂected in market prices. Yet, as long as consumers and producers do not take these costs into account, we will burn too much coal, oil and gas.