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Risk-averse mitigation decisions in an unpredictable climate system


Lontzek, Thomas S; Narita, Daiju (2011). Risk-averse mitigation decisions in an unpredictable climate system. Scandinavian Journal of Economics, 113(4):937-958.

Abstract

Risk aversion plays a central role in the decisions made in the face of uncertainties, and climate-change mitigation should be no exception. However, the interlinkage of risk aversion and climate-change uncertainties has hardly been investigated numerically, in part because of the computational difficulties of stochastic optimization. In this paper, we apply the numerical techniques of stochastic optimization to the economic modeling of climate change, with the aim of modeling the decision preferences of a risk-conscious agent in the face of unpredictable climate change. The model underlines the critical role played by the risk-aversion parameter in determining the effects of uncertainties on mitigation, not only in level but also in sign.

Abstract

Risk aversion plays a central role in the decisions made in the face of uncertainties, and climate-change mitigation should be no exception. However, the interlinkage of risk aversion and climate-change uncertainties has hardly been investigated numerically, in part because of the computational difficulties of stochastic optimization. In this paper, we apply the numerical techniques of stochastic optimization to the economic modeling of climate change, with the aim of modeling the decision preferences of a risk-conscious agent in the face of unpredictable climate change. The model underlines the critical role played by the risk-aversion parameter in determining the effects of uncertainties on mitigation, not only in level but also in sign.

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2 citations in Web of Science®
3 citations in Scopus®
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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Business Administration
Dewey Decimal Classification:330 Economics
Language:English
Date:2011
Deposited On:15 Feb 2012 07:13
Last Modified:06 Sep 2017 15:38
Publisher:Wiley-Blackwell Publishing, Inc.
ISSN:0347-0520
Publisher DOI:https://doi.org/10.1111/j.1467-9442.2011.01679.x
Other Identification Number:merlin-id:4493

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