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Adaptive model-predictive climate policies in a multi-country setting

Author

Listed:
  • BRECHET, Thierry

    (Université catholique de Louvain, CORE and Louvain School of Management, B-1348 Louvain-la-Neuve, Belgium)

  • CAMACHO, Carmen

    (CNRS and Université Paris 1 Panthéon-Sorbonne, France)

  • VELIOV, Vladimir M.

    (ORCOS, Institute of Mathematical Methods in Economics, Vienna University of Technology, Austria)

Abstract

The purpose of this paper is to extend the use of integrated assessment models by defining rational policies based on predictive control and adaptive behavior. The paper begins with an review of the main IAMs and their use. Then the concept of Model Predictive Nash Equilibrium (MPNE) is introduced within a general model involving heterogeneous economic agents operating in (and interfering with) a common environment. This concept captures the fact that agents do not have a perfect foresight for several ingredients of the model, including that of the environment. A version of the canonical IAM (DICE) is developed as a benchmark case. The concept of MPNE is then enhanced with adaptive learning about the environmental dynamics and the damages caused by global warming. The approach is illustrated by some numerical experiments in a two-region setting for several scenarios.

Suggested Citation

  • BRECHET, Thierry & CAMACHO, Carmen & VELIOV, Vladimir M., 2012. "Adaptive model-predictive climate policies in a multi-country setting," LIDAM Discussion Papers CORE 2012049, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2012049
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    1. Grüne, Lars & Semmler, Willi & Stieler, Marleen, 2015. "Using nonlinear model predictive control for dynamic decision problems in economics," Journal of Economic Dynamics and Control, Elsevier, vol. 60(C), pages 112-133.
    2. Greiner, Alfred & Gruene, Lars & Semmler, Willi, 2014. "Economic growth and the transition from non-renewable to renewable energy," Environment and Development Economics, Cambridge University Press, vol. 19(4), pages 417-439, August.

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    More about this item

    Keywords

    optimal control; global warming; predictive control; adaptive behavior; integrated assessment;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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