Journal
CLIMATIC CHANGE
Volume 107, Issue 3-4, Pages 225-239Publisher
SPRINGER
DOI: 10.1007/s10584-010-9943-1
Keywords
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Funding
- German Science Foundation (DFG) through Cluster of Excellence Integrated Climate System Analysis and Prediction (CliSAP), University of Hamburg
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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 stabilise the atmospheric content of carbon. We study how decision-makers' concerns about robustness alters policy using the Hansen and Sargent (2003, 2008) 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.
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