Global Warming And Fat Tailed-Uncertainty: Rethinking The Timing And Intensity Of Climate Policy
The possibility of low-probability extreme natural events has reignited the debate over the optimal intensity and timing of climate policy. In this paper, we contribute to the literature by assessing the implications of low-probability extreme events on environmental policy in a continuous-time real options model with “tail risk”. In a nutshell, our results indicate the importance of tail risk and call for foresighted pre-emptive climate policies.
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| Length: | 23 pages |
| Date of creation: | Jun 2012 |
| Handle: | RePEc:dun:dpaper:267 |
| Contact details of provider: | Postal: Dundee, DD1 4HN Phone: (01382) 344375 Fax: (01382) 344691 Web page: http://www.dundee.ac.uk/econman/ Email: More information through EDIRC
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References listed on IDEAS
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- Chevalier-Roignant, Benoît & Flath, Christoph M. & Huchzermeier, Arnd & Trigeorgis, Lenos, 2011. "Strategic investment under uncertainty: A synthesis," European Journal of Operational Research, Elsevier, vol. 215(3), pages 639-650, December.
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- Baranzini, Andrea & Chesney, Marc & Morisset, Jacques, 2003. "The impact of possible climate catastrophes on global warming policy," Energy Policy, Elsevier, vol. 31(8), pages 691-701, June.
- Martin L. Weitzman, 2010. "What Is The "Damages Function" For Global Warming — And What Difference Might It Make?," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 1(01), pages 57-69. Full references (including those not matched with items on IDEAS)
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