On 8 March the UK’s Channel 4 tv station screened The Great Global Warming Swindle. It’s discussed fairly favourably here, and it’s rebutted, to my satisfaction anyway, here. I’m no expert, but it does seem as though the experts are in agreement that, at the very least, climate change is happening and that it’s dangerous.
But one of the reasons I advocate Climate Stability Bonds is that those who back them need not have a strong opinion one way or the other as to the seriousness of climate change. Assume that the governments of the world decide to issue Climate Stability Bonds, which would become redeemable for a large sum once climate stability had been achieved and sustained. If the consensus of the market for the bonds is that the climate is already stable, then the bonds would sell for a quite high price. The governments would not lose much by redeeming the bonds, as the bonds would not appreciate very much. If the buyers of the bonds were wrong, it would be they, not the governments, who would lose money.
If the market believes climate change is happening and that therefore climate stability will be difficult to achieve, it will attach a low value to the bonds when they are issued. Bond purchasers would stand to make large sums if they help bring about climate stability.
The crucial point is that under a Climate Stability Bond regime it would not be up to governments, the United Nations, or any panel of experts to make a one-time only assessment of the seriousness of climate change. Under a bond regime it would be the market that would be highly motivated to inform itself about all aspects of climate change, because it stands to gain most if they get it right. And investors in the bonds would be so motivated on a continuous basis, as the market for the bonds would be constantly generating opportunities for gain to successful gatherers and interpreters of the flow of data about climate change.
A Climate Stability Bond regime would thereby bring onside the skeptics, or those who are just reluctant to pay large upfront costs for an uncertain gain. It would contract out not only the achievement of climate stability, but also the assessment of how serious a problem it is. The costs of a poor assessment would be borne by investors in the bonds, rather than taxpayers. Action to bring about climate stability – and I mean action, not empty, expensive gestures like Kyoto – would, I believe, therefore be more forthcoming.