This paper summarizes the economics of climate change. We first review the basics of climate science and the historical evolution of greenhouse gas emissions. We then discuss the relation between climate change and economics and assess the economic costs, direct and indirect, of climate change. These costs are uncertain and sensitive to the choice of discount rate, but overall, the expected costs are economically significant, and early mitigation efforts may be more cost-effective than later actions. We discuss the tradeoffs associated with different potential actions, such as carbon taxation and cap-and-trade programs. Finally, we examine the implications of climate change for asset pricing and investment choices.

TABLE OF CONTENTS
 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
 Greenhouse gases and climate change . . . . . . . . . . . . . . . . . . . . 4
 Assessing the economic costs of climate change . . . . . . . . . . 9
 Economic mechanisms for curbing emissions . . . . . . . . . . . . .16
 Implications for investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
We thank Wei Dai, Marco DiMaggio, Marlena Lee, and Gerard O’Reilly for their insightful comments . Special thanks go to Savina Rizova for many thought-provoking discussions .