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Optimal greenhouse gas emissions under various assessments of climate change ambiguity

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Author Info

  • Oleg Eismont
  • Heinz Welsch

Abstract

The probabilities associated with global warming damage are likely to be continuously revised in the light of new information. Such revisions of probability are the defining characteristic of ambiguity, as opposed to risk. This paper examines how climate change ambiguity may affect optimal greenhouse gas emission strategies, via the decision maker's attitude towards anticipated changes of damage probabilities. Two conceptualizations of ambiguity are distinguished, according to the emphasis placed on the ambiguity of priors or on the ambiguity of news, respectively. It is shown that the way in which ambiguity is viewed and the attitude taken towards it have a substantial influence on the optimal emission trajectory. Copyright Kluwer Academic Publishers 1996

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File URL: http://hdl.handle.net/10.1007/BF00357360
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Bibliographic Info

Article provided by European Association of Environmental and Resource Economists in its journal Environmental & Resource Economics.

Volume (Year): 8 (1996)
Issue (Month): 2 (September)
Pages: 129-140

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Handle: RePEc:kap:enreec:v:8:y:1996:i:2:p:129-140

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Web page: http://www.springerlink.com/link.asp?id=100263

Related research

Keywords: climate change; ambiguity; optimal control;

References

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  1. Cline, William R, 1991. "Scientific Basis for the Greenhouse Effect," Economic Journal, Royal Economic Society, vol. 101(407), pages 904-19, July.
  2. Welsch, Heinz, 1995. "Greenhouse gas abatement under ambiguity," Energy Economics, Elsevier, vol. 17(2), pages 91-100, April.
  3. Dobbs, Ian M, 1991. "A Bayesian Approach to Decision-Making under Ambiguity," Economica, London School of Economics and Political Science, vol. 58(232), pages 417-40, November.
  4. Michael Schauer, 1995. "Estimation of the greenhouse gas externality with uncertainty," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 5(1), pages 71-82, January.
  5. Peck, Stephen C. & Teisberg, Thomas J., 1993. "Global warming uncertainties and the value of information: an analysis using CETA," Resource and Energy Economics, Elsevier, vol. 15(1), pages 71-97, March.
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Cited by:
  1. Toman, Michael, 1998. "Research Frontiers in the Economics of Climate Change," Discussion Papers dp-98-32, Resources For the Future.
  2. Ohl, Cornelia, 2002. "Risk aversion - a necessary condition for limiting global environmental risks?," HWWA Discussion Papers 190, Hamburg Institute of International Economics (HWWA).
  3. Gjerde, Jon & Grepperud, Sverre & Kverndokk, Snorre, 1999. "Optimal climate policy under the possibility of a catastrophe," Resource and Energy Economics, Elsevier, vol. 21(3-4), pages 289-317, August.
  4. Andreas Lange, 2001. "A note on decisions under uncertainty: the impact of the choice of the welfare measure," Theory and Decision, Springer, vol. 51(1), pages 51-71, August.

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