An economic evaluation of the impact of policies intended to control emissions of CO2 and other greenhouse gases (GHGS) depends on the net costs of these controls and their distribution throughout the production sectors of developed and developing economies. The answers derived from appraisals of these net costs, in turn, stem from what is assumed about the timing of the controls, the pace of technological change, and any short-term secondary benefits from their control. Most economic analysis of climate policy has focused on the costs of control. There have only been a few serious attempts to estimate the economic benefits from policies associated with such long run outcomes. All of the approaches to date have made fairly strong assumptions or relied on contingent valuation estimates of hypothetical situations. While each approach offers the potential to provide information to the policymaking process, they have not to date had a marked impact on the framing of climate policy. Equally important and relevant to the design of our research is the recognition in modem economic analysis that the direction and pace of technical change, like other production activities, responds to incentives. Nonetheless, despite extensive research that measures and accounts for the effects of technological change on the relative usage of production inputs and the changing pattern of productivity and costs, we know little about how the process actually proceeds.
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