Tipping Points and Ambiguity in the Economics of Climate Change
نویسندگان
چکیده
We model optimal policy when the probability of a tipping point, the welfare change due to a tipping point, and knowledge about a tipping point's trigger all depend on the policy path. Analytic results demonstrate how optimal policy depends on the ability to affect both the probability of a tipping point and also welfare in a post-threshold world. Simulations with a numerical climate-economy model show that possible tipping points in the climate system increase the optimal near-term carbon tax by up to 45% in base case specifications. The resulting policy paths lower peak warming by up to 0.5 • C compared to a model without possible tipping points. Different types of tipping points have qualitatively different effects on policy, demonstrating the importance of explicitly modeling tipping points' effects on system dynamics. Aversion to ambiguity in the threshold's distribution can amplify or dampen the effect of tipping points on optimal policy, but in our numerical model, ambiguity aversion increases the optimal carbon tax.
منابع مشابه
Economics of tipping the climate dominoes
Greenhouse gas emissions can trigger irreversible regime shifts in the climate system, known as tipping points. Multiple tipping points a ect each other’s probability of occurrence, potentially causing a ‘domino e ect’. We analyse climate policy in the presence of a potential domino e ect. We incorporate three di erent tipping points occurring at unknown thresholds into an integrated climate–ec...
متن کاملThe Economics of Tipping the Climate Dominoes
Derek Lemoine1 & Christian P. Traeger Greenhouse gas emissions can trigger irreversible regime shifts in the climate system, known as tipping points. Multiple tipping points affect each other’s probability of occurrence, potentially causing a “domino effect”. We analyze climate policy in the presence of a potential domino effect. We incorporate three different tipping points occurring at unknow...
متن کاملTipping the Climate Dominoes
Anthropogenic emissions of greenhouse gases activate a number of feedback processes in the climate system. Scientists warn that some feedbacks can lead to abrupt and irreversible changes in climate dynamics, called tipping points. The threat of tipping points plays a major role in demands for aggressive emission reductions and for limiting warming to 2◦C, as agreed upon in the Copenhagen Accord...
متن کاملAmbiguous Tipping Points∗
We analyze the policy implications of aversion to Knightian uncertainty (or ambiguity) about the possibility of tipping points. We demonstrate two channels through which uncertainty aversion affects optimal policy in the general setting. The first channel relates to the policy’s effect on the probability of tipping, and the second channel to its differential impact in the preand post-tipping re...
متن کاملClimate change effects on economic growth: mixed empirical evidence
West Africa is vulnerable to the effects of climate change. This paper analyzed the impacts of climate change on economic growth in Anglophone West Africa with similar background, during the periods 1969-2016. Five growth model equations have been developed to incorporate climate change variables into the model. Panel data estimations such as the fixed effect model, random effect model and Haus...
متن کامل