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Evolutionary Analysis of Climate Policy and Renewable Energy: Heterogeneous Agents, Relative Welfare and Social Network

  • Nannen, Volker
  • van den Bergh, Jeroen C. J. M.

We demonstrate how an evolutionary agent-based model can be used to evaluate climate policies that take the heterogeneity of strategies of individual agents into account. An essential feature of the model is that the fitness of an economic strategy is determined by the relative welfare of the associated agent as compared to its immediate neighbors in a social network. This enables the study of policies that affect relative positions of individuals. We formulate two innovative climate policies, namely `prizes', altering directly relative welfare, and `advertisement', which influences the social network of interactions. The policies are illustrated using a simple model of global warming where a resource with a negative environmental impact---fossil energy---can be replaced by an environmentally neutral yet less cost effective alternative, namely renewable energy. It is shown that the general approach enlarges the scope of economic policy analysis.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 25881.

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Date of creation: 14 Jul 2008
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Handle: RePEc:pra:mprapa:25881
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  1. Nordhaus, William D, 1991. "To Slow or Not to Slow: The Economics of the Greenhouse Effect," Economic Journal, Royal Economic Society, vol. 101(407), pages 920-37, July.
  2. Ulrich Witt, 2008. "What is specific about evolutionary economics?," Journal of Evolutionary Economics, Springer, vol. 18(5), pages 547-575, October.
  3. Popp, David, 2004. "ENTICE: endogenous technological change in the DICE model of global warming," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 742-768, July.
  4. Daniel Friedman, 2010. "On Economic Applications of Evolutionary Game Theory," Levine's Working Paper Archive 53, David K. Levine.
  5. Janssen, Marco A. & Anderies, John M. & Walker, Brian H., 2004. "Robust strategies for managing rangelands with multiple stable attractors," Journal of Environmental Economics and Management, Elsevier, vol. 47(1), pages 140-162, January.
  6. van den Bergh, Jeroen C. J. M., 2004. "Optimal climate policy is a utopia: from quantitative to qualitative cost-benefit analysis," Ecological Economics, Elsevier, vol. 48(4), pages 385-393, April.
  7. Alan Manne & Richard Richels, 1992. "Buying Greenhouse Insurance: The Economic Costs of CO2 Emission Limits," MIT Press Books, The MIT Press, edition 1, volume 1, number 026213280x, June.
  8. William D. Nordhaus, 1992. "Rolling the 'Dice': An Optimal Transition Path for Controlling Greenhouse Gases," Cowles Foundation Discussion Papers 1019, Cowles Foundation for Research in Economics, Yale University.
  9. Ferrer-i-Carbonell, Ada, 2005. "Income and well-being: an empirical analysis of the comparison income effect," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 997-1019, June.
  10. Nordhaus, William D & Yang, Zili, 1996. "A Regional Dynamic General-Equilibrium Model of Alternative Climate-Change Strategies," American Economic Review, American Economic Association, vol. 86(4), pages 741-65, September.
  11. Joshua M. Epstein & Robert L. Axtell, 1996. "Growing Artificial Societies: Social Science from the Bottom Up," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262550253, June.
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