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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Bibliographic InfoPaper provided by Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne in its series Documents de travail du Centre d'Economie de la Sorbonne with number 12029.
Length: 25 pages
Date of creation: Apr 2012
Date of revision:
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Integrated assessment; adaptive behavior; learning; climate change.;
Other versions of this item:
- 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
- O13 - Economic Development, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-02 (All new papers)
- NEP-ENE-2012-05-02 (Energy Economics)
- NEP-ENV-2012-05-02 (Environmental Economics)
- NEP-RES-2012-05-02 (Resource Economics)
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