Ambiguous Tipping Points∗
نویسندگان
چکیده
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 regimes. We then extend a recursive dynamic model of climate policy and tipping points to include uncertainty aversion. Numerically, aversion to Knightian uncertainty in the face of an ambiguous tipping point increases the optimal tax on carbon dioxide emissions, but only by a small amount. JEL Codes: Q54, D90, D81, C61
منابع مشابه
Halting the Climate Dominoes: Mitigation Policy Under Interacting Tipping Points
Scientific research highlights the possibility that man-made greenhouse gas emissions can trigger irreversible regime shifts in the climate system, so-called tipping points. The literature is particularly concerned with the possibility that a first regime shift, e.g., reinforcing the temperature response to emissions, significantly increases the likelihood of other tipping points, starting a do...
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 کاملEconomics 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 Points and Ambiguity in the Economics of Climate Change
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 mo...
متن کامل