Corpus ID: 42658894

The Effect of Learning on Climate Policy under Fat-tailed Uncertainty

@inproceedings{Hwang2013TheEO,
  title={The Effect of Learning on Climate Policy under Fat-tailed Uncertainty},
  author={I. C. Hwang and F. Reyn{\`e}s and R. Tol},
  year={2013}
}
We construct an endogenous (Bayesian) learning model with fat-tailed uncertainty on the equilibrium climate sensitivity and solve the model with stochastic dynamic programming. In our model a decision maker updates her belief on the climate sensitivity through temperature observations each time period and takes a course of action (carbon reductions) based on her belief. We find that the uncertainty is partially resolved over time, although the rate of learning is relatively slow, and the… Expand

Figures and Tables from this paper

Learning and Climate Feedbacks: Optimal Climate Insurance and Fat Tails * ( Job Market Paper )
We study the effect of potentially severe climate change on near-term optimal climate change policy, accounting for learning and uncertainty in the climate system. In particular, we study uncertaintyExpand
Climate Policy Under Fat-Tailed Risk: An Application of Dice
Uncertainty plays a significant role in evaluating climate policy, and fat-tailed uncertainty may dominate policy advice. Should we make our utmost effort to prevent the arbitrarily large impacts ofExpand
Climate policy under fat-tailed risk: an application of FUND
TLDR
It is found that fat tails by no means justify arbitrarily large carbon taxes, and the recommended tax lies between $20 and $330/tC, depending on the percentile used. Expand
Fat-tailed uncertainty and the learning-effect
One of the recent findings in the economics of climate change is that emissions control plays a significant role in the reduction of the tail-effect of fat-tailed uncertainty on welfare. The currentExpand
Risk , Inequality , and Climate Change ∗
We study both analytically and numerically the impact of risk and inequality on the optimal carbon price, focusing in particular on the possibility that the world’s poor will bear the brunt ofExpand
General Bayesian Learning in Dynamic Stochastic Models: Estimating the Value of Science Policy
TLDR
It is found that today's policymaker must set emission policy without the expectation that new information will enable timely revisions to policy, and recursive dynamic programming methods are extended to allow for nonconjugate learning about an uncertain parameter. Expand
Working Paper Series No . 65-2013 Active Learning about Climate Change
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.Expand
The Climate Risk Premium
I formally analyze the marginal value of reducing greenhouse gas emissions under uncertainty about how much emissions warm the climate and under stochastic shocks to consumption growth and to theExpand
The Climate Risk Premium: How Uncertainty Affects the Social Cost of Carbon
I formally analyze the marginal value of reducing greenhouse gas emissions under uncertainty about how much emissions warm the climate and under stochastic shocks to consumption growth and to theExpand
The Climate Risk Premium: How Uncertainty Affects the Social Cost of Carbon
  • D. Lemoine
  • Journal of the Association of Environmental and Resource Economists
  • 2021
I analyze the marginal value of reducing greenhouse gas emissions (the “social cost of carbon”) under uncertainty about warming, under uncertainty about how much warming reduces consumption, andExpand
...
1
2
...

References

SHOWING 1-10 OF 75 REFERENCES
Learning, Growth and Climate Feedbacks Does the Fat Tail Wag the Dog? *
We study the effect of potentially severe climate change on near-term optimal climate change policy, accounting for learning and uncertainty in the climate system. In particular, we study theExpand
Learning about climate change and implications for near-term policy
Climate change is an issue of risk management. The most important causes for concern are not the median projections of future climate change, but the low-probability, high-consequence impacts.Expand
Climate Policy Under Fat-Tailed Risk: An Application of Dice
Uncertainty plays a significant role in evaluating climate policy, and fat-tailed uncertainty may dominate policy advice. Should we make our utmost effort to prevent the arbitrarily large impacts ofExpand
The Curious Role of "Learning" in Climate Policy: Should We Wait for More Data?
Given the large uncertainties regarding potential damages from climate change and the significant but also uncertain costs of reducing greenhouse emissions, the debate over a policy response is oftenExpand
Global warming uncertainties and the value of information: an analysis using CETA
Abstract In this paper, we investigate the sensitivity of optimal carbon control strategies to parameters of the Carbon Emissions Trajectory Assessment (CETA) Model, and we use CETA in a simpleExpand
Climate change, mitigation and adaptation with uncertainty and learning
One of the major issues in climate change policy is how to deal with the considerable uncertainty that surrounds many of the elements. Some of these uncertainties will be resolved through the processExpand
Fat-tailed uncertainty and the learning-effect
One of the recent findings in the economics of climate change is that emissions control plays a significant role in the reduction of the tail-effect of fat-tailed uncertainty on welfare. The currentExpand
On Modeling and Interpreting the Economics of Catastrophic Climate Change
  • M. Weitzman
  • Economics
  • The Review of Economics and Statistics
  • 2009
With climate change as prototype example, this paper analyzes the implications of structural uncertainty for the economics of low-probability, high-impact catastrophes. Even when updated by BayesianExpand
Bayesian learning, growth, and pollution
Abstract Environmental problems, such as climate change, have great uncertainties. Current expectations are that uncertainties about climate change will be resolved quickly. We examine thisExpand
The Climate Change Learning Curve
The key element in the tension between those who believe climate change is an issue and those who do not is essentially the question of whether we are merely in a long period of shock-induced aboveExpand
...
1
2
3
4
5
...