Regime shifts and uncertainty in pollution control

Aart de Zeeuw and Amos Zemel

Journal of Economic Dynamics and Control, 2012, vol. 36, issue 7, 939-950

Abstract: We develop a simple model of managing a system subject to pollution damage, such as climate change, under the risk of an abrupt and random jump in the damage function. The model allows the full dynamic characterization of the optimal emission policies under uncertainty. The results imply precautionary behavior in contrast with the ambiguous outcomes reported in the literature for models of catastrophic occurrences. The framework is used to analyze the adaptation vs. mitigation dilemma and provides a simple criterion to determine when adaptation activities should be undertaken.

Keywords: Environmental pollution; Optimal management; Catastrophic transitions; Uncertainty; Adaptation; Mitigation (search for similar items in EconPapers)
JEL-codes: Q28 Q52 Q54 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (72)

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Working Paper: Regime Shifts and Uncertainty in Pollution Control (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:36:y:2012:i:7:p:939-950

DOI: 10.1016/j.jedc.2012.01.006

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