The economics of global climate leadership

The Economist: THE International Energy Agency has released its latest World Energy Outlook. The most sobering piece of information in it is a recurring highlight: the estimated time at which the world is "locked in" to a rise in global temperatures of at least 2 degrees Celsius. By 2017, existing energy infrastructure will be sufficient to generate such a scenario; for the world to halt warming at that 2-degree level, it would need to ensure that all additional energy infrastructure was zero carbon or begin retiring existing infrastructure before the end of its useful economic life. Both strategies are difficult to contemplate, and 2017 is not very far away at all.

But the big story in the 2012 outlook is the change in the demand for and supply of energy. Unsurprisingly, emerging markets, and Asia especially, account for ever more of the world's energy demand. Somewhat surprisingly, new exploration and technology—mostly the technique for obtaining unconventional oil and gas known as hydraulic fracturing, or "fracking"—will make America a net exporter of energy within a few decades. Patterns of energy trade will shift significantly as a result...