Climate economics : orthodox or hetheredox

A scientific consensus has been established on the existence of climate change. However, it is not the case for solutions to implement in order to limit global warming to 2°C. Considered as a science related to production, consumption and transfer of wealth, economics give us the keys to limit climate change. Two economic theories exist on this subject: the heterodox theory and the orthodox theory.

On one hand, we have the orthodox economic theory, based on mathematical formulas, which considers that market based instruments are the most efficient to prevent climate change. In order to do so, a fixed carbon price should be implemented worldwide, supervised by a multilateral organization. This “top down” approach means that solutions decided by policy makers have to be implemented to the whole society.

On the other hand, there are climate economists often assimilated to the orthodox theory and the “political economics”. This one is more based on social sciences as it focuses on human activities forming a society. This bottom-up approach puts an emphasis on individuals, their needs and behaviors, to analyze which actions are the best suited for each issue. The political economy states that individuals are the key to implement useful and coherent decisions. In no way there is just one solution able to tackle every issue. Each problem is different from the other and each solution has to be different too. That is why they compare several policies in order to know which one has to be set-up according to the issue.

The Kyoto Protocol embodies the failure of the top-down approach. Because policy makers forgot geopolitical issues and the civil society needs, it failed. If forgotten, all these factors are impediments to achieving a global solution.

Today policies tend to go towards a bottom-up approach. By taking into account the needs and abilities of every state, there is a better chance to find an efficient solution. Undoubtedly, it’s by mixing these two approaches that a real solution will be found to limit global warming.