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Incorporating Investment Uncertainty into Greenhouse Policy Models

Author

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  • John R. Birge
  • Charles H. Rosa

Abstract

Greenhouse gas policy decisions require comprehensive understanding of atmospheric, economic, and social impacts. Many studies have considered the effects of atmospheric uncertainty in global warming, but economic uncertainties, have received Less analysis. We consider a key component of economic uncertainty: the return on investments in new technologies. Using a mathematical! programming model, we show that ignoring uncertainty in technology investment policy may lead to decreases as great as 2 percent in overall expected economic activity in the U.S. with even higher losses in possible future scenarios. These results indicate that both federal and private technology investment policies should be based on models explicitly incorporating uncertainty.

Suggested Citation

  • John R. Birge & Charles H. Rosa, 1996. "Incorporating Investment Uncertainty into Greenhouse Policy Models," The Energy Journal, , vol. 17(1), pages 79-90, January.
    • Handle: RePEc:sae:enejou:v:17:y:1996:i:1:p:79-90
    DOI: 10.5547/ISSN0195-6574-EJ-Vol17-No1-5
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    References listed on IDEAS

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    3. Alan Manne & Richard Richels, 1992. "Buying Greenhouse Insurance: The Economic Costs of CO2 Emission Limits," MIT Press Books, The MIT Press, edition 1, volume 1, number 026213280x, December.
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