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Alternative Types of Ambiguity and their Effects on Climate Change Regulation

Phoebe Koundouri, Nikitas Pittis (), Panagiotis Samartzis, Nikolaos Englezos () and Andreas Papandreou ()
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Phoebe Koundouri: Dept. of International and European Economic Studies, Athens University of Economics and Business
Nikitas Pittis: University of Piraeus, Greece

No 1706, DEOS Working Papers from Athens University of Economics and Business

Abstract: This paper focuses on different types of ambiguity that affect climate change regulation. In particular, we analyze the effect of the interactions among three types of agents, namely, the decision maker (DM), the experts and the society, on the probabilistic properties of green-house gas (GHG) emissions and the formation of environmental policy, under two types of ambiguity: "deferential ambiguity" and "preferential ambiguity". Deferential ambiguity refers to the uncertainty that DM faces concerning to which expert's forecast (scenario) to defer. Preferential ambiguity stems from the potential inability of DM to correctly discern the society's preferences about the desired change of GHG emissions. This paper shows that the existence of deferential and preferential ambiguities have significant effects on GHG emissions regulation.

Keywords: decision making on climate change; ambiguity; deep uncertainty; deferential ambiguity; preferential ambiguity; tail risks of environmental-policy variables. (search for similar items in EconPapers)
JEL-codes: D8 D80 D81 D83 D (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hme and nep-upt
Date: 2017-11
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