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Aronsson, Thomas; Backlund, Kenneth; Löfgren, Karl‐Gustaf

doi:10.1023/a:1008200513848

Cited by 34 publications

(1 citation statement)

References 10 publications

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“…Such threshold uncertainty should be taken into account when designing policies or measures against climate change. During the last five decades a flow of papers dealing with such threshold uncertainty (mostly based on the assumption of only one stochastic climate threshold) have been published; see the papers by Cropper (1976), Reed and Heras (1992), Clarke and Reed (1994), Aronsson et al (1998), Gjerde et al (1999), Naevdal and Oppenheimer (2007), Tsur and Zemel (2008, 2009, Traeger (2014, 2016), Lontzek et al (2015), Engström and Gars (2016), and van der Ploeg and de Zeeuw (2018). 1 We will in the following take as an underlying assumption that current use of fossil fuel generates emissions that add to a stock of GHGs that affects the probability distribution for hitting a climate threshold or tipping point of a more or less severe consequence.…”

Section: Introductionmentioning

confidence: 99%

Competing stochastic thresholds: The green transition as a race between “the good” and “the ugly”

Lorentzen,

Strøm,

Vislie

2024

Preprint

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We study a highly aggregated fossil-based world economy with two competing stochastic thresholds or tipping points. Current production generates emissions that add to a stock of GHGs that affect the probability distribution of hitting a climate threshold with severe consequences (the “ugly” scenario). The fossil-intensive output is used either for current consumption or as R&D-investment in knowledge production, with the stock of knowledge affecting the probability distribution for hitting a “good” threshold or having a technological breakthrough (the “good” scenario) providing a clean emission-free substitute to fossil energy. We characterize an optimal strategy for allocating resources over time, given that no threshold has been hit, with the strategy or decision rules being continuously revised due to the induced changes in the derived probability distribution. To avoid the ugly scenario, while pushing for the good one, we find that the conditional expected marginal benefit or willingness-to-pay for knowledge will be increasing over time, with a non-decreasing rate of R&D investment and a non-increasing rate of consumption. Implementation of this strategy requires a global organization with coercive power, equipped with instruments so as to tax the negative stock externality and to subsidize the provision of the public good or stock of knowledge. An important task for the global planner is continuously to update the hazard rates for hitting the two thresholds. JEL Classification C02, H23, H41, Q54, Q55

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Section: Introductionmentioning

confidence: 99%

Competing stochastic thresholds: The green transition as a race between “the good” and “the ugly”

Lorentzen,

Strøm,

Vislie

2024

Preprint

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Optimal nuclear waste burial policy under uncertainty

Kama

Fodha

2009

Optim Control Appl Methods

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The aim of this paper is to study the optimal nuclear waste burial policy under an uncertainty: the possibility that an accident might occur in the future. The framework is an optimal growth model with pollution disutility. We show, under some conditions on the waste burial policy, that nuclear power may be a long-term solution for the world energy demand. Under uncertainty on the future safety of the buried waste, the social planner will decide to decrease the rate of waste burying, but the evolution of consumption and hence the evolution of the level of buried waste, are ambiguous. Depending on some simple conditions on the balanced growth rate of the economy and on the preference parameters of the households, the optimal amount of buried waste may increase, even if there is a risk of accident in the future.

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Managing, Inducing, and Preventing Regime Shifts: A Review of the Literature

Long

2020

Dynamic Modeling and Econometrics in Economics and Finance

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How do economic agents manage expected shifts in regimes? How do they try to influence or prevent the arrival of such shifts? This paper provides a selective survey of the analysis of regime shifts from an economic view point, with particular emphasis on the use of the techniques of optimal control theory and differential games. The paper is organized as follows. Section 2 gives an overview of the concepts of regime shifts, thresholds, and tipping points. Section 3 shows how unknown tipping points affect the optimal current policy of decision makers, with or without ambiguity aversion. Section 4.s focus is on political regime shifts in a two-class economy: how the elite may try to prevent revolution by using policy instruments such as repression, redistribution, and gradual democratization. Section 5 reviews models of dynamic games in resource exploitation involving regime shifts and thresholds. Section 6 reviews some studies of regime shifts in industrial organization theory, with focus on R&D races, including efforts to sabotage rivals in order to prevent entry. Section 7 reviews games of regime shifts when players can manage a Big Push. Section 8 discusses some directions for future research.

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Untitled

Cited by 34 publications

References 10 publications

Competing stochastic thresholds: The green transition as a race between “the good” and “the ugly”

Competing stochastic thresholds: The green transition as a race between “the good” and “the ugly”

Optimal nuclear waste burial policy under uncertainty

Managing, Inducing, and Preventing Regime Shifts: A Review of the Literature

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