On the optimal timing of reductions of CO2 emissions; an economists' perspective on the debate on "when flexibility"

Reducing the emission of greenhouse gases to reduce climate change is high on the policy agenda. Discounted costs of reduction are estimated to be substantial. They depend on the employment of various flexibility mechanisms that affect these costs. Reducing the emission of greenhouse gases to reduce climate change is high on the policy agenda. Discounted costs of reduction are estimated to be substantial. They depend on the employment of various flexibility mechanisms that affect these costs. One of these flexibility mechanisms is the so-called when-flexibility stressing the timing of policy measures aimed at reducing CO2-emissions. This paper surveys the arguments in favour of early and late reduction. By means of an illustration of some of the key-mechanisms, we discuss an applied analysis of optimal timing performed with the applied general equilibrium model DICE.