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Active Learning about Climate Change

In Chang Hwang, Richard Tol () and Marjan Hofkes ()
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In Chang Hwang: Institute for Environmental Studies, Vrije Universiteit, Amsterdam, The Netherlands

Working Paper Series from Department of Economics, University of Sussex Business School

Abstract: We develop a climate-economy model with active learning. We consider three ways of active learning: improved observations, adding observations from the past and improved theory from climate research. From the model, we find that the decision maker invests a significant amount of money in climate research. Expenditures to increase the rate of learning are far greater than the current level of expenditure on climate research, as it helps in taking improved decisions. The optimal carbon tax for the active learning model is nontrivially lower than that for the uncertainty model and the passive learning model.

Keywords: Climate policy; deep uncertainty; active learning; Bayesian statistical decision; integrated assessment; dynamic programming (search for similar items in EconPapers)
JEL-codes: Q54 (search for similar items in EconPapers)
Date: 2013-11
New Economics Papers: this item is included in nep-ene, nep-env and nep-res
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