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Time is Running Out: The 2°C Target and Optimal Climate Policies

  • Yu-Fu Chen
  • Michael Funke
  • Nicole Glanemann

The quintessence of recent natural science studies is that the 2°C target can only be achieved with massive emission reductions in the next few years. The central twist of this paper is the addition of this limited time to act into a non-perpetual real options framework analysing optimal climate policy under uncertainty. The window-of-opportunity modelling setup shows that the limited time to act may spark a trend reversal in the direction of low-carbon alternatives. However, the implementation of a climate policy is evaded by high uncertainty about possible climate pathways.

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Paper provided by Economic Studies, University of Dundee in its series Dundee Discussion Papers in Economics with number 262.

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Length: 28 pages
Date of creation: Dec 2011
Date of revision:
Handle: RePEc:dun:dpaper:262
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  1. Chen, Yu-Fu & Funke, Michael & Glanemann, Nicole, 2011. "Dark Clouds or Silver Linings? Knightian Uncertainty and Climate Change," SIRE Discussion Papers 2011-64, Scottish Institute for Research in Economics (SIRE).
  2. Weitzman, Martin L., 2009. "Additive Damages, Fat-Tailed Climate Dynamics, and Uncertain Discounting," Scholarly Articles 9639963, Harvard University Department of Economics.
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  8. John V. Leahy, 1993. "Investment in Competitive Equilibrium: The Optimality of Myopic Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 108(4), pages 1105-1133.
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  12. Stokey, Nancy L, 1998. "Are There Limits to Growth?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 1-31, February.
  13. Detlef Vuuren & Elke Stehfest & Michel Elzen & Tom Kram & Jasper Vliet & Sebastiaan Deetman & Morna Isaac & Kees Klein Goldewijk & Andries Hof & Angelica Mendoza Beltran & Rineke Oostenrijk & Bas Ruij, 2011. "RCP2.6: exploring the possibility to keep global mean temperature increase below 2°C," Climatic Change, Springer, vol. 109(1), pages 95-116, November.
  14. Detlef Vuuren & Jae Edmonds & Mikiko Kainuma & Keywan Riahi & Allison Thomson & Kathy Hibbard & George Hurtt & Tom Kram & Volker Krey & Jean-Francois Lamarque & Toshihiko Masui & Malte Meinshausen & N, 2011. "The representative concentration pathways: an overview," Climatic Change, Springer, vol. 109(1), pages 5-31, November.
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