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

  • Chen, Yu-Fu
  • Funke, Michael
  • Glanemann, Nicole

The quintessence of recent natural science studies is that the 2 degrees 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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File URL: http://hdl.handle.net/10943/320
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Paper provided by Scottish Institute for Research in Economics (SIRE) in its series SIRE Discussion Papers with number 2012-17.

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Date of creation: 2012
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Handle: RePEc:edn:sirdps:320
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  8. 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).
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