On the Economics of Climate Policy
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Gary S. Becker
Abstract
We analyze the central features of economic policies to mitigate climate change. The basic structure of Pigouvian “carbon pricing” is shown to follow from a standard Hotelling problem for the intertemporal pricing of an exhaustible resource. We extend this analysis to consider the strength and timing of research incentives, the costs of implementation delay and the impact of anticipated future technologies on current carbon prices. We study a variety of issues related to the valuation of climate investments, including uncertainty as to the future timing and distribution of climate impacts and the appropriate social rate of discount for valuing policies. Under reasonable circumstances the insurance properties of climate investments may warrant unusually low discount rates. We use the same framework to argue that policy makers in developing countries will discount the expected returns from climate investments more heavily, because such investments have weaker insurance value in the developing world.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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- Comment on 'Distributional Implications of Alternative U.S. Greenhouse Gas Control Measures'
- Equity, Heterogeneity and International Environmental Agreements
- Comment on "Equity, Heterogeneity and International Environmental Agreements"
- Climate Policy's Uncertain Outcomes for Households: The Role of Complex Allocation Schemes in Cap-and-Trade
- Comment on "Climate Policy's Uncertain Outcomes for Households: The Role of Complex Allocation Schemes in Cap-and-Trade"
- The Social Evaluation of Intergenerational Policies and Its Application to Integrated Assessment Models of Climate Change
- Comment on "The Social Evaluation of Intergenerational Policies and Its Application to Integrated Assessment Models of Climate Change"
- What are the Costs of Meeting Distributional Objectives for Climate Policy?
- Comment on "What are the Costs of Meeting Distributional Objectives for Climate Policy?"
- CIM-EARTH: Framework and Case Study
- Comment on "CIM-EARTH: Framework and Case Study"
- The Global Effects of Subglobal Climate Policies
- Comment on "The Global Effects of Subglobal Climate Policies"
- Analytical General Equilibrium Effects of Energy Policy on Output and Factor Prices
- Comment on "Analytical General Equilibrium Effects of Energy Policy on Output and Factor Prices"
- The Distributional Impact of Climate Policy
- Comment on "The Distributional Impact of Climate Policy"
- On the Economics of Climate Policy
- Comment on "On the Economics of Climate Policy": Is Climate Change Mitigation the Ultimate Arbitrage Opportunity?
Articles in the same Issue
- Symposium
- Distributional Implications of Alternative U.S. Greenhouse Gas Control Measures
- Comment on 'Distributional Implications of Alternative U.S. Greenhouse Gas Control Measures'
- Equity, Heterogeneity and International Environmental Agreements
- Comment on "Equity, Heterogeneity and International Environmental Agreements"
- Climate Policy's Uncertain Outcomes for Households: The Role of Complex Allocation Schemes in Cap-and-Trade
- Comment on "Climate Policy's Uncertain Outcomes for Households: The Role of Complex Allocation Schemes in Cap-and-Trade"
- The Social Evaluation of Intergenerational Policies and Its Application to Integrated Assessment Models of Climate Change
- Comment on "The Social Evaluation of Intergenerational Policies and Its Application to Integrated Assessment Models of Climate Change"
- What are the Costs of Meeting Distributional Objectives for Climate Policy?
- Comment on "What are the Costs of Meeting Distributional Objectives for Climate Policy?"
- CIM-EARTH: Framework and Case Study
- Comment on "CIM-EARTH: Framework and Case Study"
- The Global Effects of Subglobal Climate Policies
- Comment on "The Global Effects of Subglobal Climate Policies"
- Analytical General Equilibrium Effects of Energy Policy on Output and Factor Prices
- Comment on "Analytical General Equilibrium Effects of Energy Policy on Output and Factor Prices"
- The Distributional Impact of Climate Policy
- Comment on "The Distributional Impact of Climate Policy"
- On the Economics of Climate Policy
- Comment on "On the Economics of Climate Policy": Is Climate Change Mitigation the Ultimate Arbitrage Opportunity?
