Agricultural Economics Department


Date of this Version



Published by the Department of Agricultural Economics, University of Nebraska-Lincoln. Copyright 2010 Regents of the University of Nebraska.


The status of the United States initiatives to limit green house gas (GHG) emissions is the topic of this article. Although there are uncertainties associated with the science of climate change, some aspects of the science are known with virtual certainty (they have a greater than 99% chance of being true). Scientists know with virtual certainty that levels of greenhouse gases, like carbon dioxide in the atmosphere have been increasing since pre-industrial times; that the atmospheric buildup of CO2 and other greenhouse gases is largely the result of human activities such as the burning of fossil fuels; and that increasing greenhouse gas concentrations tends to warm the planet.

Despite this vast scientific consensus and its relevance for human kind’s welfare, a solution to the problem has not yet been reached. An obstacle in this respect is the very nature of the problem. Any jurisdiction - whether a nation, state, or city - that takes actions to limit its emissions will bear the costs of those actions, while the benefits (reduced risk of climate change damages), will be distributed globally. The climate effects from a single jurisdictions actions will be small, thus the benefits it obtains from its own climate policy actions will be less than the cost it incurs. This is despite the fact that the benefits of global action may well be greater than global costs. This situation creates a free-rider problem, in which it is in the interest of each jurisdiction to wait for others to take action and benefit from them (that is, freeride). This is the fundamental reason why the highest levels of effective government should be involved, that is, sovereign states (nations). And this is also why international cooperation is essential.