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Analyses of the costs and benefits of climate policy, such as the Stern Review, evaluate alternative strategies to reduce greenhouse gas emissions by requiring that the cost of emission cuts in each and every year has to be covered by the associated value of avoided damage, discounted by a an exogenously chosen rate. An alternative is to optimize abatement programmes towards a stationary state, where the concentrations of greenhouse gases are stabilized and shadow prices, including the rate of discount, are determined endogenously. This paper examines the properties of optimized stabilization. It turns out that the implications for the evaluation of climate policy are substantial if compared with evaluations of the present value of costs and benefits based on exogenously chosen shadow prices. Comparisons of discounted costs and benefits tend to exaggerate the importance of the choice of discount rate, while ignoring the importance of future abatement costs, which turns out to be essential for the optimal abatement path. Numerical examples suggest that early action may be more beneficial than indicated by comparisons of costs and benefits discounted by a rate chosen on the basis of current observations. [Copyright &y& Elsevier]

Current climate policies are based on the use of Global Warming Potentials (GWPs) to compare emissions of various greenhouse gases. Yet, from an economic point of view, more efficient methods exist. We compare the potential costs of implementing some long-term goal for stabilization of the climate in three cases: Reduce CO2 emissions only, reduce emissions of the four greenhouse gases CO2, CH4, N2O and SF6 using the standard IPCC GWPs and reduce emissions of the same four gases with efficient and flexible, time dependent metrics. A multi-gas approach with GWPs reduces the costs by 8 percent when compared with CO2 reductions only, whereas the costs may be reduced by an additional 2 percent if using flexible metrics. If compared with the use of GWPs, we find that efficient weights increase the cost savings of including non-CO2 gases in climate policy by 15-40%, depending on the stabilization goal. [ABSTRACT FROM AUTHOR]