Bounded uncertainty and climate change economics

Christopher J. Costello, Michael G. Neubert, Stephen A. Polasky, Andrew R. Solow

Research output: Contribution to journalArticlepeer-review

24 Scopus citations

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 languageEnglish (US)
Pages (from-to)8108-8110
Number of pages3
JournalProceedings of the National Academy of Sciences of the United States of America
Volume107
Issue number18
DOIs
StatePublished - May 4 2010

Keywords

  • Risk aversion
  • Temperature sensitivity
  • Truncated distribution

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