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Tail-effect and the Role of Greenhouse Gas Emissions Control

Author

Listed:
  • In Chang Hwang

    (Institute for Environmental Studies, Vrije Universiteit, Amsterdam, The Netherlands)

  • Richard S.J. Tol

    (Department of Economics, University of Sussex, Falmer, United Kingdom
    Institute for Environmental Studies, Vrije Universiteit, Amsterdam, The Netherlands
    Faculty of Economics and Business Administration, Vrije Universiteit, Amsterdam, The Netherlands
    Tinbergen Institute, Amsterdam, The Netherlands)

  • Marjan W. Hofkes

    (Faculty of Economics and Business Administration, Vrije Universiteit, Amsterdam, The Netherlands
    Institute for Environmental Studies, Vrije Universiteit, Amsterdam, The Netherlands)

Abstract
This paper investigates the role of emissions control on reducing the tail-effect of the fat-tailed distribution of the climate sensitivity. Through a simple analysis on temperature distributions and some numerical simulations using the well-known DICE model, we find that the option for emissions control effectively prevents the tail-effect. Climate policy based on HARA utility is less sensitive to fat tails than climate policy based on CRRA utility.

Suggested Citation

  • In Chang Hwang & Richard S.J. Tol & Marjan W. Hofkes, 2013. "Tail-effect and the Role of Greenhouse Gas Emissions Control," Working Paper Series 6613, Department of Economics, University of Sussex Business School.
    • Handle: RePEc:sus:susewp:6613
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    File URL: http://www.sussex.ac.uk/economics/documents/wps-66-2013.pdf
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    References listed on IDEAS

    as
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    8. Millner, Antony, 2013. "On welfare frameworks and catastrophic climate risks," Journal of Environmental Economics and Management, Elsevier, vol. 65(2), pages 310-325.
    9. In Hwang & Frédéric Reynès & Richard Tol, 2013. "Climate Policy Under Fat-Tailed Risk: An Application of Dice," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 56(3), pages 415-436, November.
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    Cited by:

    1. In Chang Hwang & Richard S.J. Tol & Marjan W. Hofkes, 2013. "Active Learning about Climate Change," Working Paper Series 6513, Department of Economics, University of Sussex Business School.

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    More about this item

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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