Time preference, stock externalities and strategic reactions - Policy implications in climate change

This paper examines the relationship between the rate of time preference an d strategic reactions in dealing with climate change caused by anthropogeni c greenhouse gas (GHG) emissions. Treating climate change as stock external ities, the RICE model (Nordhaus and Yang [1996]) is employed in this paper for simulation studies. The simulation results show that when regions' rate of time preference in evaluating climate change is sufficiently low, the p aths of efficient GHG emission reduction measurement and the inefficient Na sh equilibrium outcome are close. The paper also provides general interpret ations of such phenomena. Finally, the implications of a low rate of time p reference on GHG emission reduction policies are discussed.