How Can Policy Encourage Economically Sensible Climate Adaptation?
In: The Design and Implementation of U.S. Climate Policy
This paper considers the role of incentive based climate adaptation policies. It uses the early literature on pricing and capacity choices under demand uncertainty to describe how revised price structures for the substitutes for climate services can be treated as anticipatory adaptation. In many situations the policies determining the prices of these services make them difficult to adjust. Thus, excess demand will not be managed through price adjustment. This situation is important because it implies that the rationing rules determining who is served influence both capacity planning and pricing decisions. The lesson drawn from these models is that reform of pricing policy for climate substitutes offers a ready basis for incentive based adaptation policy. The last part of the paper offers some empirical evidence on how the price elasticity of the residential demand for water changes with variations in seasonal precipitation. The findings suggest marked differences between normal and dry conditions for the Phoenix metropolitan area. These results reinforce the need to co-ordinate changes in pricing policy with any capacity planning developed for water supplies as part of anticipatory climate adaptation. Similar relationships may well apply for other substitutes for climatic services.
(This abstract was borrowed from another version of this item.)
|This chapter was published in: ||This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number
12160.||Handle:|| RePEc:nbr:nberch:12160||Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fankhauser, Samuel & Smith, Joel B. & Tol, Richard S. J., 1999. "Weathering climate change: some simple rules to guide adaptation decisions," Ecological Economics, Elsevier, vol. 30(1), pages 67-78, July.
- Daron Acemoglu & Philippe Aghion & Leonardo Bursztyn & David Hemous, 2010.
"The Environment and Directed Technical Change,"
2010.93, Fondazione Eni Enrico Mattei.
- Acemoglu, Daron & Aghion, Philippe & Bursztyn, Leonardo & Hemous, David, 2010. "The Environment and Directed Technical Change," Seminar Papers 762, Stockholm University, Institute for International Economic Studies.
- Daron Acemoglu & Philippe Aghion & Leonardo Bursztyn & David Hemous, 2009. "The Environment and Directed Technical Change," NBER Working Papers 15451, National Bureau of Economic Research, Inc.
- Acemoglu, Daron & Aghion, Philippe & Bursztyn, Leonardo & Hemous, David, 2011. "The Environment and Directed Technical Change," CEPR Discussion Papers 8660, C.E.P.R. Discussion Papers.
- Howe Charles W. & Smith Mark Griffin & Bennett Lynne & Brendecke Charles M. & Flack J. Ernest & Hamm Robert M. & Mann Roger & Rozaklis Lee & Wunderlich Karl, 1994. "The Value of Water Supply Reliability in Urban Water Systems," Journal of Environmental Economics and Management, Elsevier, vol. 26(1), pages 19-30, January.
- Olmstead, Sheila M. & Michael Hanemann, W. & Stavins, Robert N., 2007.
"Water demand under alternative price structures,"
Journal of Environmental Economics and Management,
Elsevier, vol. 54(2), pages 181-198, September.
- Carlton, Dennis W, 1977. "Peak Load Pricing with Stochastic Demand," American Economic Review, American Economic Association, vol. 67(5), pages 1006-10, December.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberch:12160. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.