Economic Decision Making in the Face of Uncertain Climate Thresholds

Event Sponsor: 
Mathematics and Computer Science Division Seminar
Start Date: 
Mar 20 2008 (All day)
Building/Room: 
Building 221, Rm. A216
Location: 
Argonne National Laboratory
Speaker(s): 
David McInerney
Speaker(s) Title: 
University of Chicago
Host: 
Robert Jacob

Anthropogenic greenhouse gas (GHG) emissions bring the threat of abrupt climate change. Decision makers are faced with the task of weighing the costs of reducing GHG emissions versus the economic impacts of uncertain future climate change. To address this problem, coupled economic and climate models are used to determine optimal paths for GHG emission reductions that maximize a time-weighted utility of consumption, i.e. a measure of "well-being" of current and future generations. Our work improves on previous studies by considering the effects of i) a climate threshold, ii) uncertainty in key model parameters, and iii) insuring against worst-case outcomes rather than maximizing expected utility.

New technologies could play a large role in reducing greenhouse gas concentrations. I will examine the influence of carbon capture and storage on optimal GHG reduction paths. Important factors that influence the implementation of a new technology, such as constraining the availability of this technology in early years, and reducing costs of the technology as it becomes widely used, are considered.

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