Adaptive Model-Predictive Climate Policies in a Multi-Country Setting
AbstractThe purpose of this paper is to extend the use of integrated assessment models by defining rational policies based on predictive control and adaptive behavior. The paper begins with an review of the main IAMs and their use. Then the concept of Model Predictive Nash Equilibrium (MPNE) is introduced within a general model involving heterogeneous economic agents operating in (and interfering with) a common environment. This concept captures the fact that agents do not have a perfect foresight for several ingredients of the model, including that of the environment. A version of the canonical IAM (DICE) is developed as a benchmark case. The concept of MPNE is then enhanced with adaptive learning about the environmental dynamics and the damages caused by global warming. The approach is illustrated by some numerical experiments in a two-region setting for several scenarios.
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Date of creation: Apr 2012
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Integrated assessment; adaptative behavior; learning; climate change;
Other versions of this item:
- Thierry Bréchet & Carmen Camacho & Vladimir M. Veliov, 2012. "Adaptive Model-Predictive Climate Policies in a Multi-Country Setting," Documents de travail du Centre d'Economie de la Sorbonne 12029, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
- BRECHET, Thierry & CAMACHO, Carmen & VELIOV, Vladimir M., 2012. "Adaptive model-predictive climate policies in a multi-country setting," CORE Discussion Papers 2012049, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-08-23 (All new papers)
- NEP-ENE-2012-08-23 (Energy Economics)
- NEP-ENV-2012-08-23 (Environmental Economics)
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