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for adaptation (including reduction of other stresses on resource
systems) to lower the cost of climate change in connection with
agriculture, forestry, and water resources (Crosson 1989, Mendelsohn
et al. 1994, Reilly 1995, Frederick et al. 1997, Sohngen
the Second Assessment Report of the Intergovernmental Panel on
Climate Change (New York: University of Cambridge Press): 297-306.
Howarth, R. H. 1996. "Climate Change and Overlapping Generations,"
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Group III to the Second Assessment Report of the Intergovernmental
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125-144. Azar, C. 1998. "Are Optimal CO2 Emissions Reall
exploit a double dividend) may fear a loss of competitiveness if other
countries allocate their allowances gratis, though the seriousness of
this issue in practice is unclear. Differences in the domestic tax
treatment of corporate income also will have im
and Stevens (1993) analyze different equity principles in the context of
an international trading system; Rose and Tietenberg (1993) consider
the consequences for economic development of international trading.
Michael Toman RFF 98-32 13 interest groups, b
permits be designed; how would gratis allocations be pursued? This is
a hugely important issue in the United States, with a rapidly growing
literature, but in the interest of conserving some space I do not
develop these ideas further here. Stavins (1997)
This leads in turn to consideration of various second-best approaches,
where developing countries gradually assume greater responsibility
as their per capita incomes rise. Various proposals include staggered
participation in emissions stabilization and re
may be weak; the presence of side payments can help ameliorate this
problem.19 Simple models abstract from the fact that international
relations are affected by actions on a number of issues at once,
leading to linkage between climate and other environmen
policy-relevant knowledge concerns the "double dividend" resulting
from interaction between climate policies and existing taxes
(Bovenberg and de Mooij 1994, Bovenberg and Goulder 1996, Goulder
1995, Parry 1995a, Parry et al. 1997, Welsch 1996). Most empi
reductions might be made more intertemporally credible, for example
through investments that seek to induce cost-reducing technical
innovation which makes it easier for future decisionmakers to accept
more stringent emissions targets.16 Substantial potent
Blackman, A. and X. Wu. 1997. "Climate Impacts of Foreign Direct
Investment in the Chinese Power Sector: Barriers and Opportunities."
Draft manuscript (Washington, DC: Resources for the Future,
December). Bovenberg, A. L. and R. A. de Mooij. 1994. "Enviro
scientific and technical knowledge, and the functioning of institutions
for resource management and public health. Studies of adaptation
potential explicitly or implicitly rely upon these social assets. However,
the lack of adequate infrastructure is alre
Laboratory and Oak Ridge, TN: Oak Ridge National Laboratory,
September). Jacoby, H. D., et al. 1997. "CO2 Emissions Limits:
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Carraro, C. and D. Siniscalco. 1993. "Strategies for the
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Tietenberg. 1993. "An International System of Tradeable C
Emissions. Final Report, U.S. EPA Cooperative Agreement #CR818579.
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Energy and the Environment vol. 18: 397-478. Ha-Duong, M., M. J.
Grubb, and J.-C. Hourcade. 1997. "Influence of Socioeconomic Inertia
and Uncertainty on Optimal CO2-Emission Abatement," Nature vol.
390: 270-273. Hagem, C. 1996. "Joint Implementation Under
Risky Business: the Economic Risks of Climate Change in the United
States which provided the initial inspiration for this document. To
these authors, entities, and publishers, and to the many others
referenced in this document: thank you for your work and
vs. Quantities Revisited: The Case of Climate Change." RFF Discussion
Paper 98-02 (Washington, DC: Resources for the Future). Reilly, J.
1995. "Climate Change and Global Agriculture: Recent Findings and
Issues," American Journal of Agricultural Economics
Implementation Contracts." Paper presented at the European
Association of Environmental and Resource Economists Conference,
Tilburg. Newell, R. G., A. B. Jaffe, and R. N. Stavins. 1998. "The
Induced Innovation Hypothesis and Energy-Saving Technological
Because climate change is a canonical example of a collective action
problem-actions within each country affect welfare in all countries,
and effective responses require a large degree of international
participation-climate change also is a canonical exam
by the appropriate national and international authorities, could yield
new and useful insights for decisionmakers in the relatively short
term. In other cases, though, basic factual uncertainties-in particular,
about climate change risks and possibilities
Intergenerational Decisionmaking." RFF Discussion Paper 97-48
(Washington, DC: Resources for the Future). Krause, F. 1996. "The
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Carbon Dioxide Abatement: A Summary of Poll Results." EMMMF 14
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Econometric General Equilibrium Assessment," in D. Gaskin
indirect opportunity costs: if the supply of innovative effort is less than
infinitely elastic, which seems reasonable to assume, then increased
innovation in GHG reduction necessarily will make other innovation
more expensive and thus crowd it out to som
highlighted in the IPCC Second Assessment, which states that energy
efficiency improvements on the order of 10- 30% might be possible at
little cost or even with net benefits, even while most "top-down"
economic models indicate a significant cost for stab
Adapting to Climate Change: Assessments and Issues (New York:
Springer-Verlag). Sohngen, B., R. Mendelsohn, R. Sedjo, and K. Lyon.
1997. "An Analysis of Global Timber Markets." RFF Discussion Paper
97-37 (Washington, DC: Resources for the Future). Stavins
dispute about the appropriate economic weights for trading off
abatement of gases with different lifetimes and warming potentials
(Stewart and Wiener 1992, Reilly and Richards 1993, Hammitt et al.
1996). 13 See Hourcade et al. (1996b) and Repetto and Aust
interesting unanswered question in this context is the extent to which
the results would be affected by the introduction of declining nearterm marginal benefits from reductions in conventional pollutants as
a byproduct of effort to cut GHG emissions. Mich
if permits are auctioned the incentives for innovation can be
enhanced, since the drop in the equilibrium permit price lowers total
payments in the auction. The degree of appropriability of economic
rent from an abatement innovation also affects incentive
optimum before the imposition of GHG policies) as well as to the
direct costs of climate-related R&D. 12 More recent work in this area
that builds on Milliman and Prince (1989) includes Jaffe and Stavins
(1995), Parry (1995b, 1997), and Jung et al. (1996)