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The Climate Policy Dilemma

  • Robert S. Pindyck

Climate policy poses a dilemma for environmental economists. The economic argument for stringent GHG abatement is far from clear. There is disagreement among both climate scientists and economists over the likelihood of alternative climate outcomes, over the nature and extent of the uncertainty over those outcomes, and over 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 cannot be based on the kinds of modeling exercises that have permeated the literature, 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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18205.

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Date of creation: Jul 2012
Date of revision:
Publication status: published as Robert S. Pindyck, 2013. "The Climate Policy Dilemma," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 7(2), pages 219-237, July.
Handle: RePEc:nbr:nberwo:18205
Note: EEE
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  1. Stephen Newbold & Adam Daigneault, 2009. "Climate Response Uncertainty and the Benefits of Greenhouse Gas Emissions Reductions," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 44(3), pages 351-377, November.
  2. Robert J. Barro, 2007. "Rare Disasters, Asset Prices, and Welfare Costs," NBER Working Papers 13690, National Bureau of Economic Research, Inc.
  3. Michael Greenstone & Elizabeth Kopits & Ann Wolverton, 2011. "Estimating the Social Cost of Carbon for Use in U.S. Federal Rulemakings: A Summary and Interpretation," Working Papers 1106, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
  4. William D. Nordhaus, 2011. "Estimates of the Social Cost of Carbon: Background and Results from the RICE-2011 Model," NBER Working Papers 17540, National Bureau of Economic Research, Inc.
  5. Pindyck, Robert S., 2012. "Uncertain outcomes and climate change policy," Journal of Environmental Economics and Management, Elsevier, vol. 63(3), pages 289-303.
  6. Partha Dasgupta, 2008. "Discounting climate change," Journal of Risk and Uncertainty, Springer, vol. 37(2), pages 141-169, December.
  7. Ravi Bansal & Marcelo Ochoa, 2011. "Temperature, Aggregate Risk, and Expected Returns," NBER Working Papers 17575, National Bureau of Economic Research, Inc.
  8. Robert J. Barro & Tao Jin, 2009. "On the Size Distribution of Macroeconomic Disasters," NBER Working Papers 15247, National Bureau of Economic Research, Inc.
  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. Robert S. Pindyck & Neng Wang, 2009. "The Economic and Policy Consequences of Catastrophes," NBER Working Papers 15373, National Bureau of Economic Research, Inc.
  11. 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.
  12. Ravi Bansal & Marcelo Ochoa, 2011. "Welfare Costs of Long-Run Temperature Shifts," NBER Working Papers 17574, National Bureau of Economic Research, Inc.
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