Environmental Policy Under Model Uncertainty: A Robust Optimal Control Approach

Michael Funke and Michael Paetz

Quantitative Macroeconomics Working Papers from Hamburg University, Department of Economics

Abstract: The design of optimal environmental policy inherits model uncertainty. We investigate the consequences in a simple linear model, where the aim of the policymaker is to stabilize the atmospheric content of carbon. We study how decision-makers' concerns about robustness alters policy using the Hansen and Sargent (2000, 2003, 2007) approach. The analysis shows that a policymaker, who fears about model misspecification should react more aggressively to changes in the stock of atmospheric carbon and reduce emissions stronger.

Keywords: robust control; model uncertainty; environmental policy (search for similar items in EconPapers)
JEL-codes: C61 D81 Q25 Q28 (search for similar items in EconPapers)
Date: 2007-03
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Environmental policy under model uncertainty: a robust optimal control approach (2011)
Working Paper: Environmental policy under model uncertainty: a robust optimal control approach (2011)
Working Paper: Environmental Policy Under Model Uncertainty: A Robust Optimal Control Approach (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:ham:qmwops:20703

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