Global warming – who pays and when?

The economics of climate change is driving what kind of pact nations may be willing to make.

World leaders are becoming fixated on climate change. That's good news. But agreeing with one another about who will do what to slow the warming of the planet won't be easy. The answer is difficult but simple – sit down and get started.

In the coming months, there will be plenty of opportunity. Next weekend President Bush heads to Sydney, Australia, for an economic summit of Pacific Rim leaders. Australian Prime Minister John Howard, who chairs that meeting, has put climate change atop the agenda. In late September the United Nations will hold a climate-change conference, followed closely by a US-sponsored meeting in Washington of the 15 biggest greenhouse-gas emitting countries.

All these lead up to a big climate summit to be convened in Bali, Indonesia, in December. That's expected to produce an international agreement to replace the 1997 Kyoto Protocol, never signed by the US, which expires in 2012.

Maybe scientists can afford to debate the pace and extent of climate change, but the evidence of potential harm is clear enough that economic decisions must be made soon. Those economic choices mean weighing several questions:

Should countries emphasize cutting their greenhouse-gas emissions or adapting to a warmer world? Should they spend on developing new technologies or capping emissions? What's the trade-off between the economic costs and benefits of aggressive action?

Yet another important consideration: How to accommodate the needs of developing countries, many of which may face the worst effects of warming but have the fewest resources to battle it.

Asking how much the fight might injure the world economy is a legitimate question. The widely reported Stern Review produced for the British government last year urges that 1 percent of the world's gross domestic product be invested each year in fighting climate change in order to steer clear of its worst effects. Unmitigated global warming could risk cutting world GDP by 20 percent, the review says.

But other economists have disputed the findings, arguing that less radical measures may be equally effective. Or, they argue, funds might be better spent encouraging economic growth, making future generations richer and thus better able to cope with the problem.

For example, climate change is forecast to increase the spread of diseases in some parts of the world. But some argue it may be more effective to spend funds directly on combating the diseases rather than trying to halt the warming itself.

"Climate change may turn out to be an environmental question with an economic answer," said Yvo de Boer, the UN's top climate official, at yet another climate conference in Vienna this week. He pointed out that nations will be making trillions of dollars in investments in energy infrastructure in coming decades. Governments can influence what is built by providing incentives such as subsidies and tax breaks for innovative clean technologies.

The environmental question clearly is an economic question. Who will pay and how much? It's vital that a greenhouse-gas reduction plan emerge in Bali. But it will need to balance a basketful of sensitive economic issues.