The Role of Economics in Climate Change Policy

Warwick McKibbin and Peter Wilcoxen

Journal of Economic Perspectives, 2002, vol. 16, issue 2, 107-129

Abstract: The most important characteristic of climate change as a policy problem is uncertainty. From climatology to economics, uncertainties are pervasive, large and difficult to resolve. However, the economic theory of environmental policy under uncertainty provides a clear guide to the design of an appropriate policy. An efficient and practical approach would be a hybrid that incorporates the best features of tradable permits and emissions taxes. Unfortunately, international negotiations have taken a different approach, focusing on rigid targets and timetables for emissions reductions. The result has been the Kyoto Protocol, an agreement with no real chance of reducing greenhouse gas emissions.

Date: 2002
Note: DOI: 10.1257/0895330027283
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