Economic Ideas for a Complex Climate Policy Regime
AbstractThe parsimony of economic theory provides general insights into an otherwise complex world. However, the most straightforward organizing principles from theory have not often taken hold in environmental policy or in the decentralized climate policy regime that is unfolding. One reason is inadequate recognition of a variety of institutions. This paper addresses three ways the standard model may inadequately anticipate the role of institutions in the actual implementation of climate policy, with a US focus: multilayered authority across jurisdictions, the impressionistic rather than deterministic influence of prices through subsidiary jurisdictions, and the complementary role of prices and regulation in this context. The economic approach is built on the premise that incentives affect behavior. We suggest an important pathway of influence for economic theory is to infuse incentive-based thinking into the conventional regulatory framework. In a complex policy regime, incentives can be shaped by shadow prices as well as market prices.
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Bibliographic InfoPaper provided by Resources For the Future in its series Discussion Papers with number dp-13-03-rev.
Date of creation: 08 Mar 2013
Date of revision:
institutions; federalism; subsidiarity; shadow prices; incentives; regulation;
Find related papers by JEL classification:
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
- D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
This paper has been announced in the following NEP Reports:
- NEP-AGR-2013-07-05 (Agricultural Economics)
- NEP-ALL-2013-07-05 (All new papers)
- NEP-ENE-2013-07-05 (Energy Economics)
- NEP-ENV-2013-07-05 (Environmental Economics)
- NEP-RES-2013-07-05 (Resource Economics)
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