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Model Uncertainty in Climate Change Economics: A Review and Proposed Framework for Future Research

Author

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  • Loïc Berger
  • Massimo Marinacci

    (Bocconi University [Milan, Italy])

Abstract

We review recent models of choices under uncertainty that have been proposed in the economic literature. In particular, we show how different concepts and methods of economic decision theory can be directly useful for problems in environmental economics. The framework we propose is general and can be applied in many different fields of environmental economics. To illustrate, we provide a simple application in the context of an optimal mitigation policy under climate change.

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  • Loïc Berger & Massimo Marinacci, 2020. "Model Uncertainty in Climate Change Economics: A Review and Proposed Framework for Future Research," Post-Print hal-02914088, HAL.
    • Handle: RePEc:hal:journl:hal-02914088
    Note: View the original document on HAL open archive server: https://hal.science/hal-02914088
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    3. Ilke Aydogan & Loïc Berger & Valentina Bosetti & Ning Liu, 2023. "Three Layers of Uncertainty," Journal of the European Economic Association, European Economic Association, vol. 21(5), pages 2209-2236.
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    5. Bose, Subir & Daripa, Arup, 2023. "Eliciting second-order beliefs," Journal of Mathematical Economics, Elsevier, vol. 107(C).
    6. Ceron, Federica & Vergopoulos, Vassili, 2022. "Objective rationality and recursive multiple priors," Journal of Mathematical Economics, Elsevier, vol. 102(C).
    7. Stanca Lorenzo, 2023. "Robust Bayesian Choice," Working papers 079, Department of Economics, Social Studies, Applied Mathematics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
    8. Lorenzo Stanca, 2023. "Robust Bayesian Choice," Carlo Alberto Notebooks 690 JEL Classification: C, Collegio Carlo Alberto.
    9. Svenn Jensen & Christian P. Traeger & Christian Träger, 2021. "Pricing Climate Risk," CESifo Working Paper Series 9196, CESifo.
    10. Tørstad, Vegard & Wiborg, Vegard, 2023. "Commitment Ambiguity and Ambition in Climate Pledges," Institute on Global Conflict and Cooperation, Working Paper Series qt7gd693zp, Institute on Global Conflict and Cooperation, University of California.
    11. Anderson, Robert M. & Duanmu, Haosui & Ghosh, Aniruddha & Khan, M. Ali, 2024. "On existence of Berk-Nash equilibria in misspecified Markov decision processes with infinite spaces," Journal of Economic Theory, Elsevier, vol. 217(C).
    12. Eddai, Nahed & Guerdjikova, Ani, 2023. "To mitigate or to adapt: How to deal with optimism, pessimism and strategic ambiguity?," Journal of Economic Behavior & Organization, Elsevier, vol. 211(C), pages 1-30.
    13. Ongsakul, Viput & Papangkorn, Suwongrat & Jiraporn, Pornsit, 2023. "Estimating the effect of climate change exposure on firm value using climate policy uncertainty: A text-based approach," Journal of Behavioral and Experimental Finance, Elsevier, vol. 40(C).

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    More about this item

    Keywords

    Ambiguity; non-expected utility; model uncertainty; climate change;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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