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This paper argues that the problem with the targets and timetable approach to climate policy is that it ignores uncertainty about costs. An alternative approach on coordinating short run prices within a long run emissions targeting framework is outlined. A global economic model is used to demonstrate the nature of the economic uncertainty about climate policy and the gains to be achieved by equalizing carbon prices across countries. The paper also shows that although price and quantity-based systems appear to be similar they can fundamentally change the international transmission of economic shocks.

It is widely recognised that the coming into force of the Kyoto Protocol will be insufficient in achieving climate change control. Therefore, research on climate policy is focussing on the forthcoming negotiations on the policy architecture and abatement commitments that will be adopted after 2012. This paper adopts a game-theoretic approach to model climate policy and provides some results on the implications of alternative emission reduction targets beyond 2012. In particular, six scenarios are discussed and their impacts on the main economic variables are assessed. Most importantly, the paper will focus on the relationship between future emission targets and participation incentives, namely, it will examine whether there exist future emission targets that could be accepted by the US, China and other major emitters of greenhouse gases. Some suggestions for the design of future negotiation targets will also be put forward.

In this paper we consider some of the economic implications of climate change scenarios as described in the Shared Socioeconomic Pathways (SSPs). By comparing potential water demand with estimates of (sustainable) water availability in different regions, we identify regions that are likely to be constrained in their future economic growth potential by the scarcity of water resources. We assess the macroeconomic impact of water scarcity under alternative allocation rules finding that, by assigning more water to sectors in which it has a higher value, shifting production to less water intensive sectors, and importing more water intensive goods, constrained regions can effectively neutralize these water related climate risks and adapt to a changing water environment. However, this adaptation effort is likely to imply some radical changes in water management policies.

This paper employs a new class of computable general–equilibrium (CGE) models, developed in the context of energy-economy-environmental models to simulate the impacts of the EU economy of internal and multilateral instruments for regulation of greenhouse gases (GHGs) emissions. Climate change due to emissions gases of greenhouse gases is a long-term global environmental problem. While specific impacts on different regions as well as their timing are yet uncertain, it is reasonable to suppose that unilateral voluntary action by individual countries to reduce their net emissions of GHGs is unlikely. This is because significant reduction of net GHGs emissions by a single major net emitter, say, for example the EU, is unlikely to substantially slow down the rate of increase in concentration in the atmosphere because the emissions of GHGs worldwide is increasing rapidly with spreading industrialization. On the other hand, unilateral changes in energy use patterns are widely perceived to have adverse effects on a country’s economic growth, consumer welfare and trade competitiveness. This perception is shared by both developing (DCs) and industrialized countries (INCs). Some major policy instruments have been assessed on the basis of experiments with the CGE model. The use of each of the policy instrument for direct GHGs regulation is promising. The results of the above experiments seem to show, that first, emission standards accomplish significant decreases in net GHGs emissions with negligible relative GDP and Welfare index changes and without major distributional impacts in the sense of relative changes in factor rewards. They seem to work through major reduction in coal and natural gas use and slight overall reduction in the use of petroleum. Second, auctioned tradeable permits also accomplish large decreases in net GHGs emissions, with, however a perceptible increase in the Welfare Index and significant distributional impacts in higher rewards to land owners and labor relative to capital owners. They appear to work primarily by expansion to the forest sector and associated increases offsets generation. Third, the use of a GHGs tax on positive net emissions of GHGs by industries accomplishes large reductions in net GHGs emissions with significant increase in GDP and the Welfare Index. The relative changes in factor rewards are also important and favor land owners over labor and capital owners. This instrument too appears to work primarily through considerable expansion of the forest sector and consequent increases offsets generation. Each of these instruments show sufficient promise as effective policy tools for GHGs reduction, that it would be advisable to conduct further research in each case. The choice between standards on the one hand, and market-based domestic regulatory instruments on the other, is not straightforward. These results need verification through further analysis.

A further increase in biomass energy supply is a crucial future option for reducing the Austrian contribution to climate change. Analysis of it has so far focused mainly on supply potentials and costs of production. Increased biomass energy supply, however, is also connected to economy-wide effects and to feedback effects on its own demand. This paper quantifies such effects in a general equilibrium framework of the Austrian economy for different supply scenarios. Increases in biomass energy are shown, for example, to cause substantial changes in the necessary CO 2 tax rate to reach a given emission objective level.