Climate nudging, catastrophes, and cost benefit analysis

Abstract

Green nudges (GNs) are increasingly popular behavioral interventions aimed at mitigating environmentally mediated harm, particularly in the context of climate change. The justification of GNs traditionally relies on cost-benefit analysis (CBA), which quantifies the total costs and benefits, factoring in probabilities to maximize expected utility. However, the application of CBA faces significant challenges when GNs involve potential catastrophic outcomes associated with climate change and climate nudging. We argue that the qualitative distinction between catastrophic and non-catastrophic outcomes poses a challenge for traditional CBA. While CBA is adept at assessing ordinary costs and benefits, it struggles to accommodate the putative catastrophic outcomes linked to climate change and climate nudging. To address this challenge, this article considers the lexical precautionary principle (LPP) as a viable decision-making framework for climate nudging. Unlike CBA’s decision rule, maximize expected utility, LPP maximizes lexical utility, thereby prioritizing the avoidance of catastrophic outcomes.