Regime shifts and uncertainty in pollution control
We develop a simple model of managing a system subject to pollution damage, such as climate change, under the risk of an abrupt and random jump in the damage function. The model allows the full dynamic characterization of the optimal emission policies under uncertainty. The results imply precautionary behavior in contrast with the ambiguous outcomes reported in the literature for models of catastrophic occurrences. The framework is used to analyze the adaptation vs. mitigation dilemma and provides a simple criterion to determine when adaptation activities should be undertaken.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dockner Engelbert J. & Van Long Ngo, 1993. "International Pollution Control: Cooperative versus Noncooperative Strategies," Journal of Environmental Economics and Management, Elsevier, vol. 25(1), pages 13-29, July.
- Eric Nævdal, 2003.
"Dynamic Optimisation in the Presence of Threshold Effects when the Location of the Threshold is Uncertain With an Application to a Possible Disintegration of the Western Antarctic Ice Sheet,"
143, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics..
- Naevdal, Eric, 2006. "Dynamic optimisation in the presence of threshold effects when the location of the threshold is uncertain - with an application to a possible disintegration of the Western Antarctic Ice Sheet," Journal of Economic Dynamics and Control, Elsevier, vol. 30(7), pages 1131-1158, July.
- Jon Gjerde & Sverre Grepperud & Snorre Kverndokk, 1998.
"Optimal Climate Policy under the Possibility of a Catastrophe,"
209, Research Department of Statistics Norway.
- Gjerde, Jon & Grepperud, Sverre & Kverndokk, Snorre, 1999. "Optimal climate policy under the possibility of a catastrophe," Resource and Energy Economics, Elsevier, vol. 21(3-4), pages 289-317, August.
- repec:oup:wbrobs:v:25:y:2009:i:2:p:295-321 is not listed on IDEAS
- Tsur, Yacov & Zemel, Amos, 1996. "Accounting for global warming risks: Resource management under event uncertainty," Journal of Economic Dynamics and Control, Elsevier, vol. 20(6-7), pages 1289-1305.
- Morton I. Kamien & Nancy L. Schwartz, 1971. "Optimal Maintenance and Sale Age for a Machine Subject to Failure," Management Science, INFORMS, vol. 17(8), pages B495-B504, April.
- Weitzman, Martin L., 2009.
"On Modeling and Interpreting the Economics of Catastrophic Climate Change,"
3693423, Harvard University Department of Economics.
- Martin L. Weitzman, 2009. "On Modeling and Interpreting the Economics of Catastrophic Climate Change," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 1-19, February.
- Bruno Nkuiya, 2011. "International Emission Strategies under the Threat of a Sudden Jump in Damages," Cahiers de recherche CREATE 2011-1, CREATE.
- Polasky, Stephen & de Zeeuw, Aart & Wagener, Florian, 2011.
"Optimal management with potential regime shifts,"
Journal of Environmental Economics and Management,
Elsevier, vol. 62(2), pages 229-240, September.
- Stephen Polasky & Aart de Zeeuw & Florian Wagener, 2010. "Optimal Management with Potential Regime Shifts," CESifo Working Paper Series 3237, CESifo Group Munich.
- De Zeeuw, A. & Polasky, S. & Wagener, F.O.O., 2010. "Optimal Management with Potential Regime Shifts," CeNDEF Working Papers 10-10, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
- Brozovic, Nicholas & Schlenker, Wolfram, 2011. "Optimal management of an ecosystem with an unknown threshold," Ecological Economics, Elsevier, vol. 70(4), pages 627-640, February.
- van der Ploeg, F. & de Zeeuw, A.J., 1990.
"International aspects of pollution control,"
1990-65, Tilburg University, Center for Economic Research.
- Tsur, Yacov & Zemel, Amos, 1998. "Pollution control in an uncertain environment," Journal of Economic Dynamics and Control, Elsevier, vol. 22(6), pages 967-975, June.
- Zmarak Shalizi & Franck Lecocq, 2010. "To Mitigate or to Adapt: Is that the Question? Observations on an Appropriate Response to the Climate Change Challenge to Development Strategies," World Bank Research Observer, World Bank Group, vol. 25(2), pages 295-321, August.
- Toman, Michael & Shogren, Jason, 2000. "Climate Change Policy," Discussion Papers dp-00-22, Resources For the Future.
- Barry Smit & Ian Burton & Richard Klein & J. Wandel, 2000. "An Anatomy of Adaptation to Climate Change and Variability," Climatic Change, Springer, vol. 45(1), pages 223-251, April.
- Gollier, Christian & Treich, Nicolas, 2003. " Decision-Making under Scientific Uncertainty: The Economics of the Precautionary Principle," Journal of Risk and Uncertainty, Springer, vol. 27(1), pages 77-103, August.
- William D. Nordhaus, 2006. "The "Stern Review" on the Economics of Climate Change," NBER Working Papers 12741, National Bureau of Economic Research, Inc.
- Tsur, Yacov & Zemel, Amos, 2001. "The infinite horizon dynamic optimization problem revisited: A simple method to determine equilibrium states," European Journal of Operational Research, Elsevier, vol. 131(3), pages 482-490, June.
- Yacov Tsur & Amos Zemel, 2009. "Endogenous Discounting and Climate Policy," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 44(4), pages 507-520, December.
- Clarke, Harry R. & Reed, William J., 1994. "Consumption/pollution tradeoffs in an environment vulnerable to pollution-related catastrophic collapse," Journal of Economic Dynamics and Control, Elsevier, vol. 18(5), pages 991-1010, September.
When requesting a correction, please mention this item's handle: RePEc:eee:dyncon:v:36:y:2012:i:7:p:939-950. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.