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Adaptive Model-Predictive Climate Policies in a Multi-Country Setting

  • Thierry Bréchet

    ()

    (CORE - Louvain School of Management)

  • Carmen Camacho

    ()

    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

  • Vladimir M. Veliov

    ()

    (ORCOS - Institute of Mathematical Methods in Economics)

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.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00718659.

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Date of creation: Apr 2012
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Handle: RePEc:hal:cesptp:halshs-00718659
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  1. Thierry Bréchet & François Gerard, 2007. "Climate Coalitions: A Theoretical and Computational Appraisal," Working Papers 2007.21, Fondazione Eni Enrico Mattei.
  2. Zili Yang, 2008. "Strategic Bargaining and Cooperation in Greenhouse Gas Mitigations: An Integrated Assessment Modeling Approach," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262240548, June.
  3. Edenhofer, Ottmar & Bauer, Nico & Kriegler, Elmar, 2005. "The impact of technological change on climate protection and welfare: Insights from the model MIND," Ecological Economics, Elsevier, vol. 54(2-3), pages 277-292, August.
  4. BRECHET, Thierry & CAMACHO, Carmen & VELIOV, Vladimir, 2010. "Model predictive control, the economy, and the issue of global warming," CORE Discussion Papers 2010016, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. William D. Nordhaus, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 686-702, September.
  6. Lawrance, Emily C, 1991. "Poverty and the Rate of Time Preference: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 54-77, February.
  7. Nordhaus, William D., 1993. "Rolling the 'DICE': an optimal transition path for controlling greenhouse gases," Resource and Energy Economics, Elsevier, vol. 15(1), pages 27-50, March.
  8. EYCKMANS, Johan & TULKENS, Henry, . "Simulating coalitionally stable burden sharing agreements for the climate change problem," CORE Discussion Papers RP -1677, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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