Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171090
Authors: 
Rezai, Armon
van der Ploeg, Rick
Year of Publication: 
2017
Series/Report no.: 
CESifo Working Paper 6626
Abstract: 
Temperature responses and optimal climate policies depend crucially on the choice of a particular climate model. To illustrate, the temperature responses to given emission reduction paths implied by the climate modules of the well-known integrated assessments models DICE, FUND and PAGE are described and compared. A dummy temperature module based on the climate denialists’ view is added. Using a simple welfare-maximising growth model of the global economy, the sensitivity of the optimal carbon price, renewable energy subsidy and energy transition to each of these climate models is discussed. The paper then derives max-min, max-max and min-max regret policies to deal with this particular form of climate (model) uncertainty and with climate scepticism. The max-min or min-max regret climate policies rely on a non-sceptic view of global warming and lead to a substantial and moderate amount of caution, respectively. The max-max leads to no climate policies in line with the view of climate sceptics.
Subjects: 
carbon price
renewable energy subsidy
temperature modules
climate model uncertainty
climate sceptics
max-min
max-max
min-max regret
JEL: 
H21
Q51
Q54
Document Type: 
Working Paper

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