Regime Shifts and Uncertainty in Pollution Control
We develop a simple model of managing a system subject to pollution damage under risk of an abrupt and random jump in the damage coefficient. The model allows the full dynamic characterization of the optimal emission policies under uncertainty. The results, that imply prudent behavior due to uncertainty, are compared with the ambiguous outcomes reported in the literature for similar models. The differences are explained in terms of the properties of the damage function associated with each model. The framework is used to analyze the adaptation vs. mitigation dilemma and provides a simple criterion to determine whether adaptation activities should be undertaken promptly, delayed to some future date, or avoided altogether.
|Date of creation:||2012|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.de
More information through EDIRC
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.:
- 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.
- Van Der Ploeg, F. & De Zeeuw, A.J., 1990.
"International Aspects Of Pollution Control,"
9065, Tilburg - Center for Economic Research.
- 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.
- 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.
- Jon Gjerde & Sverre Grepperud & Snorre Kverndokk, 1998.
"Optimal Climate Policy under the Possibility of a Catastrophe,"
209, Statistics Norway, Research Department.
- 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.
- Toman, Michael & Shogren, Jason, 2000. "Climate Change Policy," Discussion Papers dp-00-22, Resources For the Future.
- Brozovic, Nicholas & Schlenker, Wolfram, 2011. "Optimal management of an ecosystem with an unknown threshold," Ecological Economics, Elsevier, vol. 70(4), pages 627-640, February.
- Bruno Nkuiya, 2011. "International Emission Strategies under the Threat of a Sudden Jump in Damages," Cahiers de recherche CREATE 2011-1, CREATE.
- repec:oup:wbrobs:v:25:y:2009:i:2:p:295-321 is not listed on IDEAS
- 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.
- William D. Nordhaus, 2006. "The "Stern Review" on the Economics of Climate Change," NBER Working Papers 12741, National Bureau of Economic Research, Inc.
- 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.
- Weitzman, Martin L., 2009. "On Modeling and Interpreting the Economics of Catastrophic Climate Change," Scholarly Articles 3693423, Harvard University Department of Economics.
- 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.
- 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," Tinbergen Institute Discussion Papers 10-111/1, Tinbergen Institute.
- 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.
- 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.
- Stephen Polasky & Aart de Zeeuw & Florian Wagener, 2010. "Optimal Management with Potential Regime Shifts," CESifo Working Paper Series 3237, CESifo Group Munich.
- 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.
- 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.
- 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.
- 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.
- 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.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_3697. 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: (Julio Saavedra)
If references are entirely missing, you can add them using this form.