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Robust Control in Global Warming Management: An Analytical Dynamic Integrated Assessment

  • Hennlock, Magnus
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    Imperfect measurement of uncertainty (deeper uncertainty) in climate sensitivity is introduced in a two-sectoral integrated assessment model (IAM) with endogenous growth, based on an extension of DICE. The household expresses ambiguity aversion and can use robust control via a `shadow ambiguity premium' on social carbon cost to identify robust climate policy feedback rules that work well over a range such as the IPCC climate sensitivity range (IPCC, 2007a). Ambiguity aversion, in combination with linear damage, increases carbon cost in a similar way as a low pure rate of time preference. However, ambiguity aversion in combination with non-linear damage would also make policy more responsive to changes in climate data observations. Perfect ambiguity aversion results in an infinite expected shadow carbon cost and a zero carbon consumption path. Dynamic programming identifies an analytically tractable solution to the IAM.

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    Paper provided by Resources For the Future in its series Discussion Papers with number dp-09-19.

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    Date of creation: 04 May 2009
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    Handle: RePEc:rff:dpaper:dp-09-19
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