Uncertainty, learning and international environmental policy coordination
In this paper we construct a simple model of global warming which captures a number of key features of the global warming problem: (i) environmental damages are related to the stock of greenhouse gases in the atmosphere; (ii) the global commons nature of the problem means that these are strategic interactions between the emissions policies of the governments of individual nation states; (iii) there is uncertainty about the extent of the future damages that will be incurred by each country from any given level of concentration of greenhouse gases but there is the possibility that at a future date better information about the true extent of environmental damages may become available; an important aspect of the problem is the extent to which damages in different countries may be correlated. In the first part of the paper we consider a simple model with two symmetric countries and show that the value of perfect information is an increasing function of the correlation between damages in the two countries in both the cooperative and non-cooperative equilibria. However, while the value of perfect information is always non-negative in the cooperative equilibrium, in the non-cooperative equilibrium there is a critical value of the correlation coefficient below which the value of perfect information will be negative. In the second part of the paper we construct an empirical model of global warming distinguishing between OECD and non-OECD countries and show that in the non-cooperative equilibrium the value of perfect information for OECD countries is negative when the correlation coefficient between environmental damages for OECD and non-OECD countries is negative. The implications of these results for international agreements are discussed. Copyright Kluwer Academic Publishers 1997
Volume (Year): 9 (1997)
Issue (Month): 4 (June)
|Contact details of provider:|| Web page: http://www.springer.com|
Postal:c/o EAERE Secretariat - Fondazione Eni Enrico Mattei - Isola di San Giorgio Maggiore 8, I-30124 Venice, Italy
Web page: http://www.eaere.org/
More information through EDIRC
|Order Information:||Web: http://www.springer.com/economics/environmental/journal/10640/PS2|
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.:
- Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-987, December.
- repec:fth:jonhop:390 is not listed on IDEAS
- Deaton, Angus, 1991.
"Saving and Liquidity Constraints,"
Econometric Society, vol. 59(5), pages 1221-1248, September.
- Deaton, A., 1989. "Saving And Liquidity Constraints," Papers 153, Princeton, Woodrow Wilson School - Public and International Affairs.
- Angus Deaton, 1989. "Saving and Liquidity Constraints," NBER Working Papers 3196, National Bureau of Economic Research, Inc.
- Carroll Christopher Dixon, 2001. "Death to the Log-Linearized Consumption Euler Equation! (And Very Poor Health to the Second-Order Approximation)," The B.E. Journal of Macroeconomics, De Gruyter, vol. 1(1), pages 1-38, April.
- Christopher D. Carroll, 1997. "Death to the Log-Linearized Consumption Euler Equation! (And Very Poor Health to the Second-Order Approximation)," NBER Working Papers 6298, National Bureau of Economic Research, Inc.
- Christopher D Carroll, 1997. "Death to the Log-Linearized Consumption euler Equation! (And Very Poor Health to the Second-Order Approximation)," Economics Working Paper Archive 390, The Johns Hopkins University,Department of Economics.
- Christopher D. Carroll, 2001. "Mathematica code for Death to the Log-Linearized Consumption Euler Equation!," QM&RBC Codes 38, Quantitative Macroeconomics & Real Business Cycles.
- Maddison, David, 1995. "A cost-benefit analysis of slowing climate change," Energy Policy, Elsevier, vol. 23(4-5), pages 337-346.
- Binder, M. & Pesaran, M. H. & Samiei, S. H., 1998. "Analytical and Numerical Solution of Finite-horizon Nonlinear Rational Expectations Models," Cambridge Working Papers in Economics 9808, Faculty of Economics, University of Cambridge.
- Neave, Edwin H., 1971. "Multiperiod consumption-investment decisions and risk preference," Journal of Economic Theory, Elsevier, vol. 3(1), pages 40-53, March.
- Vives, Xavier, 1984. "Duopoly information equilibrium: Cournot and bertrand," Journal of Economic Theory, Elsevier, vol. 34(1), pages 71-94, October.
- Stephen P. Zeldes, 1989. "Optimal Consumption with Stochastic Income: Deviations from Certainty Equivalence," The Quarterly Journal of Economics, Oxford University Press, vol. 104(2), pages 275-298.
- Frederick van der Ploeg, 1993. "A Closed-form Solution for a Model of Precautionary Saving," Review of Economic Studies, Oxford University Press, vol. 60(2), pages 385-395.
- Gal-Or, Esther, 1985. "Information Sharing in Oligopoly," Econometrica, Econometric Society, vol. 53(2), pages 329-343, March.
- Carroll, Christopher D & Kimball, Miles S, 1996. "On the Concavity of the Consumption Function," Econometrica, Econometric Society, vol. 64(4), pages 981-992, July.
- Christopher D. Carroll & Miles S. Kimball, 1995. "On the concavity of the consumption function," Finance and Economics Discussion Series 95-10, Board of Governors of the Federal Reserve System (U.S.).
- Christopher D. Carroll & Miles S. Kimball, 1995. "On the Concavity of the Consumption Function," Macroeconomics 9503003, EconWPA.
- Graciela Chichilnisky & Geoffrey Heal, 1993. "Global Environmental Risks," Journal of Economic Perspectives, American Economic Association, vol. 7(4), pages 65-86, Fall.
- 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.
- Philippe Weil, 1993. "Precautionary Savings and the Permanent Income Hypothesis," Review of Economic Studies, Oxford University Press, vol. 60(2), pages 367-383.
- Skinner, Jonathan, 1988. "Risky income, life cycle consumption, and precautionary savings," Journal of Monetary Economics, Elsevier, vol. 22(2), pages 237-255, September.
- Jonathan S. Skinner, 1987. "Risky Income, Life Cycle Consumption, and Precautionary Savings," NBER Working Papers 2336, National Bureau of Economic Research, Inc.
- Gabriel Talmain, 1994. "Exact and Approximate Solutions to the Problem of Precautionary Savings," Discussion Papers 94-04, University at Albany, SUNY, Department of Economics.
- Kolstad, Charles D., 1996. "Fundamental irreversibilities in stock externalities," Journal of Public Economics, Elsevier, vol. 60(2), pages 221-233, May.
- Carraro, Carlo & Siniscalco, Domenico, 1993. "Strategies for the international protection of the environment," Journal of Public Economics, Elsevier, vol. 52(3), pages 309-328, October.
- Carraro, Carlo & Siniscalco, Domenico, 1991. "Strategies for the International Protection of the Environment," CEPR Discussion Papers 568, C.E.P.R. Discussion Papers.
- Miles, David, 1997. "A Household Level Study of the Determinants of Incomes and Consumption," Economic Journal, Royal Economic Society, vol. 107(440), pages 1-25, January.
- Blanchard, Olivier J, 1985. "Debt, Deficits, and Finite Horizons," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 223-247, April.
- Olivier J. Blanchard, 1984. "Debt, Deficits and Finite Horizons," NBER Working Papers 1389, National Bureau of Economic Research, Inc.
- Ulph, A. & Ulph, D., 1994. "Who gains from learning about global warming," Discussion Paper Series In Economics And Econometrics 9407, Economics Division, School of Social Sciences, University of Southampton.
- Siegel, Jeremy J., 1992. "The real rate of interest from 1800-1990 : A study of the U.S. and the U.K," Journal of Monetary Economics, Elsevier, vol. 29(2), pages 227-252, April.
- Caballero, Ricardo J, 1991. "Earnings Uncertainty and Aggregate Wealth Accumulation," American Economic Review, American Economic Association, vol. 81(4), pages 859-871, September.
- Golombek, R. & Hagem, C. & Hoel, M., 1993. "The Disign of a Carbon Tax in an Incomplete International Climate Agreement," Memorandum 01/1993, Oslo University, Department of Economics.
- Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-1451, November.