Optimal greenhouse gas emissions under various assessments of climate change ambiguity
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
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Volume (Year): 8 (1996)
Issue (Month): 2 (September)
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- Welsch, Heinz, 1995. "Greenhouse gas abatement under ambiguity," Energy Economics, Elsevier, vol. 17(2), pages 91-100, April.
- Cline, William R, 1991. "Scientific Basis for the Greenhouse Effect," Economic Journal, Royal Economic Society, vol. 101(407), pages 904-19, July.
- Michael Schauer, 1995. "Estimation of the greenhouse gas externality with uncertainty," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 5(1), pages 71-82, January.
- 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.
- Dobbs, Ian M, 1991. "A Bayesian Approach to Decision-Making under Ambiguity," Economica, London School of Economics and Political Science, vol. 58(232), pages 417-40, November.
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