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Adaptive Model-Predictive Climate Policies in a Multi-Country Setting

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  • Thierry Bréchet

    ()
    (CORE et Louvain School of Management)

  • Carmen Camacho

    ()
    (Centre d'Economie de la Sorbonne)

  • Vladimir M. Veliov

    ()
    (ORCOS - Institute of Mathematical Methods in Economics)

Abstract

The 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 Info

Paper 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.

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Length: 25 pages
Date of creation: Apr 2012
Date of revision:
Handle: RePEc:mse:cesdoc:12029

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Keywords: Integrated assessment; adaptive behavior; learning; climate change.;

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