Analyses | 27 October 2008

Expecting the unexpected

To estimate the emissions reductions and costs of a climate policy, analysts usually compare a policy scenario with a baseline scenario of future economic conditions without the policy. Both scenarios require assumptions about the future course of numerous factors such as population growth, technical change, and non-climate policies like taxes. The results are only reliable to the extent that the future turns out to be reasonably close to the assumptions that went into the model.Warwick McKibbin , Peter J. Wilcoxen , Adele Morris

  • Warwick McKibbin
  • Peter J. Wilcoxen
  • Adele Morris

To estimate the emissions reductions and costs of a climate policy, analysts usually compare a policy scenario with a baseline scenario of future economic conditions without the policy. Both scenarios require assumptions about the future course of numerous factors such as population growth, technical change, and non-climate policies like taxes. The results are only reliable to the extent that the future turns out to be reasonably close to the assumptions that went into the model.Warwick McKibbin , Peter J. Wilcoxen , Adele Morris

  • Warwick McKibbin
  • Peter J. Wilcoxen
  • Adele Morris
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Executive Summary

In this Working Paper the authors examine the effects of unanticipated macroeconomic shocks to growth in developing countries or a global financial crisis on the performance of three climate policy regimes: a globally-harmonised carbon tax; a global cap and trade system; and the McKibbin-Wilcoxen hybrid.