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Optimal greenhouse gas emissions under various assessments of climate change ambiguity

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  • Oleg Eismont
  • Heinz Welsch

Abstract

The probabilities associated with global warming damage are likely to be continuously revised in the light of new information. Such revisions of probability are the defining characteristic of ambiguity, as opposed to risk. This paper examines how climate change ambiguity may affect optimal greenhouse gas emission strategies, via the decision maker's attitude towards anticipated changes of damage probabilities. Two conceptualizations of ambiguity are distinguished, according to the emphasis placed on the ambiguity of priors or on the ambiguity of news, respectively. It is shown that the way in which ambiguity is viewed and the attitude taken towards it have a substantial influence on the optimal emission trajectory. Copyright Kluwer Academic Publishers 1996

Suggested Citation

  • Oleg Eismont & Heinz Welsch, 1996. "Optimal greenhouse gas emissions under various assessments of climate change ambiguity," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 8(2), pages 129-140, September.
  • Handle: RePEc:kap:enreec:v:8:y:1996:i:2:p:129-140
    DOI: 10.1007/BF00357360
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    References listed on IDEAS

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    1. Cline, William R, 1991. "Scientific Basis for the Greenhouse Effect," Economic Journal, Royal Economic Society, vol. 101(407), pages 904-919, July.
    2. Dobbs, Ian M, 1991. "A Bayesian Approach to Decision-Making under Ambiguity," Economica, London School of Economics and Political Science, vol. 58(232), pages 417-440, November.
    3. Peck, Stephen C. & Teisberg, Thomas J., 1993. "Global warming uncertainties and the value of information: an analysis using CETA," Resource and Energy Economics, Elsevier, vol. 15(1), pages 71-97, March.
    4. Welsch, Heinz, 1995. "Greenhouse gas abatement under ambiguity," Energy Economics, Elsevier, vol. 17(2), pages 91-100, April.
    5. Michael Schauer, 1995. "Estimation of the greenhouse gas externality with uncertainty," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 5(1), pages 71-82, January.
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    Citations

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    Cited by:

    1. Marion Dupoux, 2016. "The land use change time-accounting failure," Working Papers 2016/02, INRA, Economie Publique.
    2. Michael Toman, 1998. "Research Frontiers in the Economics of Climate Change," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 11(3), pages 603-621, April.
    3. Ohl, Cornelia, 2002. "Risk aversion - a necessary condition for limiting global environmental risks?," HWWA Discussion Papers 190, Hamburg Institute of International Economics (HWWA).
    4. Andreas Lange, 2001. "A note on decisions under uncertainty: the impact of the choice of the welfare measure," Theory and Decision, Springer, vol. 51(1), pages 51-71, August.
    5. 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.
    6. Kenjiro Hirata & Shinsuke Ikeda & Masako Ikefuji & Myong-Il Kang & Katsunori Yamada, 2017. "Time Discounting, Ambiguity Aversion, and Preferences for Future Environmental Policies: Evidence from Discrete Choice Experiments," ISER Discussion Paper 1012, Institute of Social and Economic Research, Osaka University.

    More about this item

    Keywords

    climate change; ambiguity; optimal control;

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