The Timing of Climate Change Policy
Sequential Decisionmaking
Given the uncertainties regarding the actual magnitude of climate change, the damages climate change will cause, and the cost of addressing those damages, it is likely that any climate policy will evolve over time, with new targets and measures replacing old ones, as we learn more about the nature of climate damages and gain experience with the costs of various approaches to reducing emissions.
An important reason to begin taking action now, therefore, is to begin learning about these uncertainties. For example, imposing immediate, moderate restrictions on CO
2 emissions would allow us to observe the costs of doing so and, in turn, gain insights into how quickly and at what cost the economy could abate emissions. Taking reasonable steps now, therefore, would allow us to learn about the costs of emissions reduction and give us a better idea of what it will take to address this pressing problem.
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Beginning now allows the economy a longer time to adjust. In particular, it sends firms and consumers the message that changes are coming and gives them time to anticipate the changes. Providing a “pre-announcement” — advance warning — about climate policy, in one economic experiment, reduced economic costs by as much as 40 percent.
10 Thus, taking immediate steps to announce a climate policy that phases in GHG reductions over time and promptly pre-announcing that policy will allow us to find the best long-term “path” to climate stability.
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