Fossil fuel addiction and the implications for climate change policy

Abstract This paper applies a behavioral economics model of cigarette addiction to the issue of fossil fuel usage and climate change. Both problems involve consumption of a currently beneficial product that causes detrimental effects in the distant future and for which current reductions in usage induces an adjustment cost. The paper argues that because fossil fuel control requires solving an international public goods problem as well as an addiction-like problem, breaking it will be more challenging. Using insights from the model, it also suggests that fossil fuel addiction, like cigarette addiction, may generate a long period of time in which people express sincere desire to convert to clean energy, but accomplish little to achieve that outcome. Finally the paper examines the history of the international anti-smoking campaign to draw insights for the campaign against global climate change. The analogy suggests that policies to reduce the present cost of non-carbon energy sources to induce voluntary adjustments in energy usage, or, policies that induce cleaner usage of fossil fuels, or geo-engineering policies that work to reverse the warming effects of higher CO 2 concentrations, may be more viable than policies that raise the cost of current fossil fuel consumption.