Climate Policy Decisions Under Ambiguity and Pressure of Time

Yu-Fu Chen, Michael Funke and Nicole Glanemann

Review of Environment, Energy and Economics - Re3, 2013

Abstract: This article summarises our studies on the optimal timing of climate policy adoption by focusing on ambiguity in the climate damage cost assessments (Chen et al., 2011) and on the limited time to achieve certain climate policy targets (Chen et al., 2012). Using real options theory, both studies conclude that climate policy adoption should be accelerated. However, the implementation of climate policy is evaded by high uncertainty about critical parameters and possible climate pathways.

Keywords: Climate policy; CO2 scenarios; Knightian uncertainty; k-ambiguity; real options; non-perpetual real options (search for similar items in EconPapers)
JEL-codes: C61 D81 Q51 Q54 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:fem:femre3:2013.02-01

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