Abstract
It has been argued recently that the combination of risk aversion and an uncertainty distribution of future temperature change with a heavy upper tail invalidates mainstream economic analyses of climate change policy. A simple model is used to explore the effect of imposing an upper bound on future temperature change. The analysis shows that imposing even a high bound reverses the earlier argument and that the optimal policy, as measured by the willingness to pay to avoid climate change, is relatively insensitive to this bound over a wide range.
Original language | English (US) |
---|---|
Pages (from-to) | 8108-8110 |
Number of pages | 3 |
Journal | Proceedings of the National Academy of Sciences of the United States of America |
Volume | 107 |
Issue number | 18 |
DOIs | |
State | Published - May 4 2010 |
Keywords
- Risk aversion
- Temperature sensitivity
- Truncated distribution