ABSTRACT
Economic analyses of climate change have generally recommended policy changes, although with considerable variability. The Stern Review on the Economics of Climate Change, in particular, calls for 'an urgent global response'. Policy responses to climate change can be broadly classified into two categories: adaptive measures to deal with the consequences of climate change and mitigation, or preventive measures intended to lower the magnitude or timing of climate change. This chapter focuses on mitigation policies, but it is becoming increasingly evident that mitigation policies need to be supplemented with adaptation policies. The Intergovernmental Panel on Climate Change (IPCC) has identified adaptation needs by major sectors. Climate change is expected to increase precipitation in some areas, mainly the higher latitudes, including Alaska, Canada, and Russia, but decrease it in other areas, including Central America, North Africa, and southern Europe. The release of greenhouse gases in the atmosphere is an example of a negative externality that imposes significant costs on a global scale.
