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Title:Environmental policy under model uncertainty: a robust optimal control approach PDF Logo
Authors:Funke, Michael
Paetz, Michael
Issue Date:2007
Series/Report no.:CESifo working paper 1938
Abstract:Model uncertainty is inherent in the design of optimal environmental policy. We investigate the consequences in a simple linear model, where the aim of the policymaker is to stabilize the carbon content of the atmosphere. We study how decision-makers' concerns about robustness alter policy using the Hansen and Sargent (2000, 2003, 2007) approach. The analysis shows that a policymaker, who fears model misspecification should react more aggressively to changes in the stock of atmospheric carbon and implement policies which deliver a greater reduction of emissions.
Subjects:robust control model uncertainty
environmental policy
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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