Optimal Technological Portfolios for Climate-Change Policy under Uncertainty: A Computable General Equilibrium Approach

David Bradford, Seung-Rae Kim (srkim@hallym.ac.kr) and Klaus Keller

No 140, Computing in Economics and Finance 2004 from Society for Computational Economics

Abstract: When exploring solutions to long-term environmental problems such as climate change, it is crucial to understand how the rates and directions of technological change may interact with environmental policies in the presence of uncertainty. This paper analyzes optimal technological portfolios for global carbon emissions reductions in an integrated assessment model of the coupled social-natural system. The model used here is a probabilistic, two-technology extension of Nordhaus" earlier model (Nordhaus and Boyer, 2000) by incorporating endogenous technological choice between conventional and carbon-free technologies. Taking into account the possible competitions among the technological options, we address the issues of optimal timing, costs and burden-sharing of optimal carbon mitigation strategies in the inherently uncertain world. We perform various analyses related to the major uncertainties about natural, socioeconomic and technological parameters, and investigate the effects of uncertainties resolution, risks and alternative political preferences. The results show that analyses ignoring uncertainty could lead to inefficient and biased technology-policy recommendations for the future.

Keywords: Integrated assessment modeling; Global Warming; Uncertainty; Endogenous technological portfolios (search for similar items in EconPapers)
JEL-codes: C68 D81 O33 (search for similar items in EconPapers)
Date: 2004-08-11
New Economics Papers: this item is included in nep-cmp
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Citations: View citations in EconPapers (1)

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