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Time is Running Out: The 2°C Target and Optimal Climate Policies

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  • Michael Funke

    ()

  • Yu-Fu Chen

    ()

  • Nicole Glanemann

    ()

Abstract

The quintessence of recent natural science studies is that the 2°C target can only be achieved with massive emission reductions in the next few years. The central twist of this paper is the addition of this limited time to act into a non-perpetual real options framework analysing optimal climate policy under uncertainty. The window-of-opportunity modelling setup shows that the limited time to act may spark a trend reversal in the direction of low-carbon alternatives. However, the implementation of a climate policy is evaded by high uncertainty about possible climate pathways.

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Bibliographic Info

Paper provided by Hamburg University, Department of Economics in its series Quantitative Macroeconomics Working Papers with number 21111.

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Date of creation: Nov 2011
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Handle: RePEc:ham:qmwops:21111

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Keywords: climate policy; CO2 scenarios; non-perpetual real options;

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