State-Contingent Environmental Policy

This research project proposes linking emission fees to actual temperatures, thereby helping to break the policy stalemate and reach agreement on an effective policy.

After two decades of debate, climate change policy remains in a stalemate between those who fear the environmental consequences if not enough is done and those who fear the economic consequences from overreacting. By linking emissions fees to actual temperatures, each side would expect such a policy to yield their preferred outcome, and the actual policy that emerges over time would be close to the theoretical optimum.