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The benefits of cooperation under uncertainty: the case of climate change

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  • BRECHET, Thierry

    (Université catholique de Louvain, CORE and Chair Lhoist Berghmans in Environmental Eonomics and Management, B- 1348 Louvain-la-Neuve, Belgium)

  • THENIE, Julien

    (Université catholique de Louvain, CORE and Chair Lhoist Berghmans in Environmental Eonomics and Management, B- 1348 Louvain-la-Neuve, Belgium; ORDECSYS Company, Chêne-Bougeries, Switzerland.)

  • ZEIMES, Thibaut

    (Université catholique de Louvain, CORE and Chair Lhoist Berghmans in Environmental Eonomics and Management, B- 1348 Louvain-la-Neuve, Belgium)

  • ZUBER, Stéphane

    (Université catholique de Louvain, CORE and Chair Lhoist Berghmans in Environmental Eonomics and Management, B- 1348 Louvain-la-Neuve, Belgium)

Abstract

This article presents an analysis of the behavior of countries defining their climate policies in an uncertain context. The analysis is made using the S-CWS model, a stochastic version of an integrated assessment growth model. The model includes a stochastic definition of the climate sensitivity parameter. We show that the impact of uncertainty on policy design critically depends on the shape of the damage function. We also examine the benefits of cooperation in the context of uncertainty: we highlight the existence of an additional benefit of cooperation, namely risk reduction.

Suggested Citation

  • BRECHET, Thierry & THENIE, Julien & ZEIMES, Thibaut & ZUBER, Stéphane, 2010. "The benefits of cooperation under uncertainty: the case of climate change," LIDAM Discussion Papers CORE 2010062, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2010062
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    1. repec:aen:journl:ej36-3-brechet is not listed on IDEAS
    2. Thierry Brechet & Henry Tulkens, 2015. "Climate Policies: A Burden, or a Gain?," The Energy Journal, , vol. 36(3), pages 155-170, July.

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    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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