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Macro Policies For Climate Change: Free Market Or State Intervention?

Pablo Ruiz Nápoles

Abstract

The central issue studied in this essay is the meaning and implications for public policy of Nicholas Stern’s statement that “Climate change is the greatest and widest-ranging market failure ever seen” (Stern, 2006).

To deal with this issue we analyze the two big currents about public policy measures in general: market oriented and state intervention. We also present the current conceptual framework for debating public policy for analyzing the policies recommended and applied so far, to deal with Climate Change’s causes and effects, from an economic perspective. We present the main arguments of the Stern Review. Finally we get into the debate between Stern and Nordhaus. Our conclusion is that there is a need for strong state intervention to make the climate change mitigation policies to reach the desired effects.

Published on 5 Feb 2014 in World Economic Review No 3, 2014