Optimal Technological Portfolios for Climate-Change Policy under Uncertainty: A Computable General Equilibrium Approach
AbstractWhen exploring solutions to long-term environmental problems such as climate change, it is crucial to understand how the rates and directions of technological change may interact with environmental policies in the presence of uncertainty. This paper analyzes optimal technological portfolios for global carbon emissions reductions in an integrated assessment model of the coupled social-natural system. The model used here is a probabilistic, two-technology extension of Nordhaus" earlier model (Nordhaus and Boyer, 2000) by incorporating endogenous technological choice between conventional and carbon-free technologies. Taking into account the possible competitions among the technological options, we address the issues of optimal timing, costs and burden-sharing of optimal carbon mitigation strategies in the inherently uncertain world. We perform various analyses related to the major uncertainties about natural, socioeconomic and technological parameters, and investigate the effects of uncertainties resolution, risks and alternative political preferences. The results show that analyses ignoring uncertainty could lead to inefficient and biased technology-policy recommendations for the future.
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Bibliographic InfoPaper provided by Society for Computational Economics in its series Computing in Economics and Finance 2004 with number 140.
Date of creation: 11 Aug 2004
Date of revision:
Integrated assessment modeling; Global Warming; Uncertainty; Endogenous technological portfolios;
Find related papers by JEL classification:
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
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