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The Challenges of Climate Policy

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  • Timothy J. Brennan

Abstract

Climate policy planners and the public should be aware of both economic challenges and arguments that may influence the intensity of the climate policies with which they have to cope. This article examines six economic challenges: cap‐and‐trade versus taxes, non‐price regulations, energy efficiency policies, mitigation versus adaptation, trade effects, and transmission planning. Three additional challenges affect the end itself: ‘fat tails’, discount rates, and whether environmental protection should be evaluated by willingness to pay. If future generations cannot compensate the present for climate policy costs, climate policy is inherently redistributive and cannot be evaluated through cost–benefit analysis alone.

Suggested Citation

  • Timothy J. Brennan, 2010. "The Challenges of Climate Policy," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 43(3), pages 225-239, September.
    • Handle: RePEc:bla:ausecr:v:43:y:2010:i:3:p:225-239
    DOI: 10.1111/j.1467-8462.2010.00598.x
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    References listed on IDEAS

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