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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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Publisher 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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Keywords: climate change; ambiguity; optimal control;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. 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. [Downloadable!] (restricted)
  2. Welsch, Heinz, 1995. "Greenhouse gas abatement under ambiguity," Energy Economics, Elsevier, vol. 17(2), pages 91-100, April. [Downloadable!] (restricted)
  3. Cline, William R, 1991. "Scientific Basis for the Greenhouse Effect," Economic Journal, Royal Economic Society, vol. 101(407), pages 904-19, July. [Downloadable!] (restricted)
  4. 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. [Downloadable!] (restricted)
  5. 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. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Michael Toman, 1998. "Research Frontiers in the Economics of Climate Change," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 11(3), pages 603-621, April. [Downloadable!] (restricted)
  2. 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. [Downloadable!] (restricted)
  3. Jon Gjerde, Sverre Grepperud and Snorre Kverndokk, 1998. "Optimal Climate Policy under the Possibility of a Catastrophe," Discussion Papers 209, Research Department of Statistics Norway. [Downloadable!]
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