Handbook on Energy and Climate Change
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Handbook on Energy and Climate Change

Edited by Roger Fouquet

This timely Handbook reviews many key issues in the economics of energy and climate change, raising new questions and offering solutions that might help to minimize the threat of energy-induced climate change.
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Chapter 15: Designing a Bretton Woods institution to address global climate change

Joseph E. Aldy


Mitigating climate change risks will require some form of global effort to limit emissions, adapt to a changing climate, and geo-engineer the global climate system. These three policy approaches – prevention, adaptation and remediation – involve, to varying degrees, little incentive to account for the external impacts of decision-making by individuals, firms and nation-states. Thus a ‘successful’ international climate policy architecture, at a minimum, will need to promote collaboration among nation-states that results in sovereign policies and actions to reduce climate change risks by modifying individuals’ and firms’ incentives. Successful collaboration requires more than a simple, initial agreement. The dynamics of learning about climate change and learning about the effectiveness of various risk mitigation measures will necessitate a number of rounds of collaboration among nations. Given the strong incentives for free-riding, what are the characteristics of an international climate policy architecture that could enable repeated collaboration in climate change risk reduction efforts?

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