The story of anthropogenic global warming is a story of “the greatest market failure the world has seen.”

That’s from Sir Nicholas Stern, a British economists at the London School of Economics and the Chief Economist of the World Bank from 2000 to 2003, who authored the Stern Review. The Stern Review is a 2006 report discussing the economics of global warming and is the most thorough and cited report on the subject. The report highlights the grave economic consequences of leaving global warming unabated. On the other hand, Stern said his report is “essentially optimistic.” The Review states that we can curtail the worst consequences of global warming if we act immediately. The longer we wait to take action, however, the costlier it will be in the long run. (In fact, the delays we’ve already been taking have been costing us.) What the report makes abundantly clear is that the cost of mitigating global warming is far exceeded by the costs to the world economy if we should choose to continue “business as usual.” In other words, it makes economic sense to work towards mitigating global warming (if people were rational and self-interested anyway). There is no longer any question that there is a benefit to mitigating global warming. The real question is why we haven’t been working towards that goal.

The existence of global warming highlights the inefficiency of markets. Stern explains:

The science tells us that GHG emissions are an externality; in other words, our emissions affect the lives of others. When people do not pay for the consequences of their actions we have market failure. This is the greatest market failure the world has seen. It is an externality that goes beyond those of ordinary congestion or pollution, although many of the same economic principles apply for its analysis.

This externality is different in 4 key ways that shape the whole policy story of a rational response. It is: global; long term; involves risks and uncertainties; and potentially involves major and irreversible change.

Further, “If we take no action to control emissions, each tonne of CO2 that we emit now is causing damage worth at least $85 – but these costs are not included when investors and consumers make decisions about how to spend their money.” Curtailing global warming would mean “People would pay a little more for carbon-intensive goods, but our economies could continue to grow strongly.

Explains oilman and adviser for President Bush, Matthew Simmons, “‘A crisis is a problem that was ignored.’ All great crises were ignored until it was too late.” The question now is whether we will wait until it’s too late to take action. I believe it is our moral imperative that we not.