Kiel Working Papers, Kiel Institute for World Economics
No 1539:
The effect of uncertainty on decision making about climate change mitigation. A numerical approach of stochastic control
Thomas S. Lontzek and Daiju Narita
Abstract: We apply standardized numerical techniques of stochastic
optimization (Judd [1998]) to the climate change issue. The model captures
the feature that the effects of uncertainty are different with different
levels of agent's risk aversion. A major finding is that the effects of
stochasticity differ even in sign as to emission control with varying
parameters: introduction of stochasticity may increase or decrease emission
control depending on parameter settings, in other words, uncertainties of
climatic trends may induce people's precautionary emission reduction but
also may drive away money from abatement
Keywords: climate change and uncertainties, stochastic control, climate policy; (follow links to similar papers)
JEL-Codes: C63,; Q54,; D81; (follow links to similar papers)
19 pages, August 2009
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