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Climate change will make the next global crash the worst …

    if policymakers don’t get serious about a carbon tax set.

    One of the winners of this year’s Nobel prize for economics – William Nordhaus – says if policymakers get serious about a carbon tax set high enough to price oil, coal and gas out of the market, a crash won’t happen. Here, though, the breakdown in international cooperation and trust becomes really damaging. Ideally, existing global institutions – the IMF, the World Bank, the UN and the World Trade Organization – would be supplemented by a new World Environmental Organisation with the power to levy a carbon tax globally. Even in the absence of a new body, they would be working together to face down the inevitable opposition to change from the fossil fuel lobby.

    Instead, the response to climate change looks similar to the response to the financial crisis: fail to recognise there is a problem until it is too late; panic; then muddle through. That’s a sobering prospect. Link