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Hedging the climate sensitivity risks of a temperature target

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  • Tommi Ekholm

Abstract

This paper addresses the problem of meeting a predetermined temperature target cost-effectively under uncertainty and gradual learning on climate sensitivity. The firstorder optimality conditions to a stochastic cost-minimization problem with a temperature constraint are first provided, portraying how marginal costs evolve with an optimal hedging strategy. Then, numerical stochastic scenarios with cost curves fitted to recent climate changemitigation scenarios are presented, illustrating both the range of possible future pathways and the effect of uncertainty to the solution. Last, the effect of several different sets of assumptions on the optimal hedging strategy are analyzed. The results highlight that the hedging of climate sensitivity risk calls for deeper early reductions, although the possibility of different assumptions prevents providing accurate policy guidance. Copyright Springer Science+Business Media Dordrecht 2014

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  • Tommi Ekholm, 2014. "Hedging the climate sensitivity risks of a temperature target," Climatic Change, Springer, vol. 127(2), pages 153-167, November.
    • Handle: RePEc:spr:climat:v:127:y:2014:i:2:p:153-167
    DOI: 10.1007/s10584-014-1243-8
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    Cited by:

    1. Tommi Ekholm & Hannele Korhonen, 2016. "Climate change mitigation strategy under an uncertain Solar Radiation Management possibility," Climatic Change, Springer, vol. 139(3), pages 503-515, December.
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    3. Ekholm, Tommi, 2018. "Climatic Cost-benefit Analysis Under Uncertainty and Learning on Climate Sensitivity and Damages," Ecological Economics, Elsevier, vol. 154(C), pages 99-106.

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