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Climate Change Policy under Spatially Structured Ambiguity: Hot Spots and the Precautionary Principle

Athanasios Yannacopoulos and Anastasios Xepapadeas ()

No 1332, DEOS Working Papers from Athens University of Economics and Business

Abstract: In view of the ambiguities and the deep uncertainty associated with climate change, we study the features of climate change policies that account for spatially structured ambiguity. Ambiguity related to the evolution of the natural system is introduced into a coupled economy-climate model with explicit spatial structure due to heat transport across the globe. We seek to answer questions about how spatial robust regulation regarding climate policies can be formulated; what the potential links of this regulation to the weak and strong version of the precautionary principle (PP) are; and how insights about whether it is costly to follow a PP can be obtained. We also study the emergence of hot spots, which are locations where local deep uncertainty may cause robust regulation to break down for the whole spatial domain, or the weak PP to be costly.

Keywords: Ambiguity; Climate change; space; maxmin expected utility; robust control regulation; hot spots; precautionary principle (search for similar items in EconPapers)
JEL-codes: Q54 Q58 D81 R11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-env and nep-upt
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