How Can Policy Encourage Economically Sensible Climate Adaptation?

V. Smith

No 16100, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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.

JEL-codes: Q4 Q54 (search for similar items in EconPapers)
Date: 2010-06
New Economics Papers: this item is included in nep-ene, nep-env, nep-reg and nep-res
Note: EEE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published as How Can Policy Encourage Economically Sensible Climate Adaptation? , V. Kerry Smith. in The Design and Implementation of US Climate Policy , Fullerton and Wolfram. 2012

Downloads: (external link)
http://www.nber.org/papers/w16100.pdf (application/pdf)

Related works:
Chapter: How Can Policy Encourage Economically Sensible Climate Adaptation? (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:16100

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w16100

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().