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Catastrophic Thresholds, Bayesian Learning And The Robustness Of Climate Policy Recommendations

Author

Listed:
  • WONJUN CHANG

    (Pacific Northwest National Laboratory, Joint Global Change Research Institute, College Park, MD 20740, USA)

  • THOMAS F. RUTHERFORD

    (#x2020;Department of Agricultural and Applied Economics, University of Wisconsin–Madison, Madison WI 53706, USA‡Optimization Theme, Wisconsin Institutes for Discovery, Madison, WI 53715, USA)

Abstract
How does risk and uncertainty in climate thresholds impact optimal short-run mitigation? This paper contrasts the near-term mitigation consequences of using an expected value, stochastic programming, and stochastic control model to capture the policy effects of uncertain climate thresholds. The risk of threshold outcomes increases expected climate damages. The passive learning associated with stochastic programming creates an extra incentive to mitigate promptly by reducing the damages from remaining threshold hazards. The active learning associated with stochastic control creates yet another incentive to do near-term mitigation, through the delaying of potential threshold effects.

Suggested Citation

  • Wonjun Chang & Thomas F. Rutherford, 2017. "Catastrophic Thresholds, Bayesian Learning And The Robustness Of Climate Policy Recommendations," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 8(04), pages 1-23, November.
    • Handle: RePEc:wsi:ccexxx:v:08:y:2017:i:04:n:s2010007817500142
    DOI: 10.1142/S2010007817500142
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