Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/49475
Authors: 
Chen, Yu-fu
Funke, Michael
Glanemann, Nicole
Year of Publication: 
2011
Series/Report no.: 
CESifo working paper: Resource and Environment Economics 3516
Abstract: 
This paper examines the impact of Knightian uncertainty upon optimal climate policy through the prism of a continuous-time real option modelling framework. We analytically determine optimal intertemporal climate policies under ambiguity. Additionally, numerical simulations are provided to illustrate the properties of the model. The results indicate that increasing Knightian uncertainty accelerates climate policy, i.e. policymakers become more reluctant to postpone the timing of climate policies into the future.
Subjects: 
climate change
Knightian uncertainty
ê ambiguity
real options
JEL: 
C61
D81
Q54
Document Type: 
Working Paper

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