An assessment of the costs and benefits of climate change mitigation policy can inform policymakers about whether such an approach makes society better off in economic terms. Changing the behavior of individuals and firms to lower their greenhouse gas emissions through climate change policies induces real resource burdens on society. On the other side of the ledger, reducing the probability and severity of various climate change impacts through a policy intervention would generate valuable benefits to society. Estimating these benefits requires an assessment of how much individuals would be willing to pay for mitigating various climate change risks. Constructing cost and benefit estimates, especially for such a long-term problem as climate change, is necessarily plagued by substantial uncertainty, and a considered cost-benefit analysis should explicitly account for uncertainty. Implementing a policy such that the incremental cost of the last unit of climate change mitigation equals the incremental benefit of this effort maximizes net social benefits. 
 
Efforts to assess the costs and benefits of climate change policies are typically undertaken with so-called integrated assessment (IA) models.  This approach integrates models from various relevant fields, such as economics and atmospheric chemistry, to better analyze the effects of emissions abatement policies. Given that near-term emissions abatement generates near-term costs but future benefits of mitigated climate change risks, the discount rate used in the model to compare the streams of benefits and costs can be very important.  In addition, characterizing low-probability, large-magnitude events, such as losing the Gulf Stream or the melting of the West Antarctic ice sheet, can also play a large role in the determinations of whether a policy passes a cost-benefit analysis. 

		Compensation Rules for Climate Policy in the Electricity Sector A new discussion paper by RFF Senior Fellows Dallas Burtraw and Karen Palmer discusses the impacts of different methods of allocating carbon emissions allowances in the electricity sector.
		Too Good to Be True? An Examination of Three Economic Assessments of California Climate Change Policy Robert N. Stavins, Judson Jaffe, and Todd Schatzki 07-12 | March 2007
		The Stern Review and the Economic Analysis of Climate Change An RFF Seminar February 2007
		Distribution of Cost Impacts under Domestic Carbon Dioxide Regulation Richard Morgenstern Weathervane Backgrounder | February 2007 Federal policies to limit greenhouse gas (GHG) emissions will impose costs on the U.S. economy. It is unlikely that these costs will be distributed equally. As a result, it is important to have both a conceptual and empirical understanding of the factors that will determine the distribution of costs and the magnitude of those costs.
		Scope and Point of Regulation in a Mandatory Climate Policy William Pizer Weathervane Backgrounder | February 2007 This paper describes options concerning the scope and point of regulation for federal polices to control greenhouse gas (GHG) emissions. The scope of a control program is an important policy choice determining which sectors and activities will be directly affected by the policy. The exact form of the policy is also important: broader market-based policies (versus narrower or non-market-based policies) offer greater opportunities to incorporate low cost mitigation options. The point of regulation turns out to be an important part of this choice because broader market-based policies may require us to think differently about who and where we regulate emissions. This analysis highlights the interconnectedness of the decisions regarding scope and point of regulation, identifies policy options, and identifies concerns that could be used to evaluate these options.
		The Economics of Climate Change Lawrence H. Goulder and William A. Pizer Discussion Paper 06-06 June 2006
		Panel: Macroeconomic Modeling Approaches Understanding Transatlantic Differences An RFF Co-Hosted Seminar Speakers discuss the costs and benefits of climate mitigation, promoting regulation vs. research, and the differing approaches of the U.S. and Europe.

		Climate Policy Design Under Uncertainty William A. Pizer Discussion Paper 05-44 October 2005 Fellow Billy Pizer argues that intensity-based targets and a price-based safety valve can lessen the downside of emissions caps.
		The Incidence of Pollution Control Policies Ian W.H. Parry, Hilary Sigman, Margaret A. Walls, and Roberton C. Williams III Discussion Paper 05-24 June 2005
		Carbon Mitigation Costs for the Commercial Sector: Discrete-Continuous Choice Analysis of Multifuel Energy Demand Richard G. Newell and William A. Pizer Discussion Paper 05-13 June 2005
		Modeling Economywide versus Sectoral Climate Policies Using Combined Aggregate-Sectoral Models William A. Pizer, Dallas Burtraw, Winston Harrington, Richard G. Newell, and James N. Sanchirico Discussion Paper 05-08 April 2005
		Model, Model on the Screen, What's the Cost of Going Green? Hadi Dowlatabadi, David R. Boyd, and Jamie MacDonald Discussion Paper 04-17 April 2004
		Beyond Kyoto: Advancing the International Effort Against Climate Change Joseph E. Aldy, John Ashton, Richard Baron, Daniel Bodansky, Steve Charnovitz, Tom Heller, Jonathan Pershing, P.R. Shukla, Laurence Tubiana, Fernando Tudela, and Xueman Wang December 2003 (A Pew Center on Global Climate Change Report)
		Discounting the Benefits of Climate Change Mitigation: How Much Do Uncertain Rates Increase Valuations? Richard G. Newell and William A. Pizer December 2001 (A Pew Center on Global Climate Change Report) See Also: Discounting the Benefits of Climate Change Policies Using Uncertain Rates Richard G. Newell and William A. Pizer Resources 146 | Winter 2002 Discounting the Distant Future: How Much Do Uncertain Rates Increase Valuations? Richard G. Newell and William A. Pizer Discussion Paper 00-45 | October 2000