Dark Clouds or Silver Linings? Knightian Uncertainty and Climate Change

Yu-Fu Chen, Michael Funke and Nicole Glanemann

No 3516, CESifo Working Paper Series from CESifo

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.

Keywords: climate change; Knightian uncertainty; ê ambiguity; real options (search for similar items in EconPapers)
JEL-codes: C61 D81 Q54 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp3516.pdf (application/pdf)

Related works:
Working Paper: Dark Clouds or Silver Linings? Knightian Uncertainty and Climate Change (2011)
Working Paper: Dark Clouds or Silver Linings? Knightian Uncertainty and Climate Change (2011)
Working Paper: Dark Clouds or Silver Linings? Knightian Uncertainty and Climate Change (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_3516

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().