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The Climate Policy Dilemma

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  • Robert S. Pindyck

Abstract

Climate policy poses a dilemma for environmental economists. The economic argument for stringent greenhouse gas (GHG) abatement is far from clear. There is disagreement among both climate scientists and economists concerning the likelihood of alternative climate outcomes, the nature and extent of the uncertainty of those outcomes, and the framework that should be used to evaluate potential benefits from GHG abatement, including key policy parameters. I argue that the case for stringent abatement--if it can be made at all--cannot be based on the kinds of modeling exercises that have permeated the literature thus far, but instead must be based on the possibility of a catastrophic outcome. I discuss how an analysis that incorporates such an outcome might be conducted. (JEL: Q54; D81, Q51) Copyright 2013, Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/reep/ret007
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Bibliographic Info

Article provided by Association of Environmental and Resource Economists in its journal Review of Environmental Economics and Policy.

Volume (Year): 7 (2013)
Issue (Month): 2 (July)
Pages: 219-237

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Handle: RePEc:oup:renvpo:v:7:y:2013:i:2:p:219-237

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References

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  1. Robert J. Barro, 2007. "Rare Disasters, Asset Prices, and Welfare Costs," NBER Working Papers 13690, National Bureau of Economic Research, Inc.
  2. Robert S. Pindyck & Neng Wang, 2013. "The Economic and Policy Consequences of Catastrophes," American Economic Journal: Economic Policy, American Economic Association, vol. 5(4), pages 306-39, November.
  3. Robert J. Barro & Tao Jin, 2009. "On the Size Distribution of Macroeconomic Disasters," NBER Working Papers 15247, National Bureau of Economic Research, Inc.
  4. Ravi Bansal & Marcelo Ochoa, 2011. "Temperature, Aggregate Risk, and Expected Returns," NBER Working Papers 17575, National Bureau of Economic Research, Inc.
  5. William D. Nordhaus, 2011. "Estimates of the Social Cost of Carbon: Background and Results from the RICE-2011 Model," Cowles Foundation Discussion Papers 1826, Cowles Foundation for Research in Economics, Yale University.
  6. Michael Greenstone & Elizabeth Kopits & Ann Wolverton, 2011. "Estimating the Social Cost of Carbon for Use in U.S. Federal Rulemakings: A Summary and Interpretation," NBER Working Papers 16913, National Bureau of Economic Research, Inc.
  7. Ravi Bansal & Marcelo Ochoa, 2011. "Welfare Costs of Long-Run Temperature Shifts," NBER Working Papers 17574, National Bureau of Economic Research, Inc.
  8. Robert S. Pindyck, 2009. "Uncertain Outcomes and Climate Change Policy," Working Papers 0907, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
  9. Melissa Dell & Benjamin F. Jones & Benjamin A. Olken, 2008. "Climate Change and Economic Growth: Evidence from the Last Half Century," NBER Working Papers 14132, National Bureau of Economic Research, Inc.
  10. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
  11. Partha Dasgupta, 2008. "Discounting climate change," Journal of Risk and Uncertainty, Springer, vol. 37(2), pages 141-169, December.
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Cited by:
  1. Rick Van der Ploeg & Aart de Zeeuw, 2013. "Climate Policy and Catastrophic Change: Be Prepared and Avert Risk," Economics Series Working Papers OxCarre Research Paper 11, University of Oxford, Department of Economics.
  2. Michael Keen & Ian Parry & Jon Strand, 2013. "Planes, ships and taxes: charging for international aviation and maritime emissions," Economic Policy, CEPR & CES & MSH, vol. 28(76), pages 701-749, October.
  3. van der Ploeg, Frederick, 2014. "Abrupt positive feedback and the social cost of carbon," European Economic Review, Elsevier, vol. 67(C), pages 28-41.
  4. Elizabeth Kopits & Alex L. Marten & Ann Wolverton, 2013. "Moving Forward with Incorporating "Catastrophic" Climate Change into Policy Analysis," NCEE Working Paper Series 201301, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Jan 2013.

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