Arbeitspapier
Pricing Climate Risk
Anthropogenic greenhouse gas emissions are changing the energy balance of our planet. Various climatic feedbacks make the resulting warming over the next decades and centuries highly uncertain. We quantify how this uncertainty changes the optimal carbon tax in a stochastic dynamic programming implementation of an integrated assessment model of climate change. We derive a general analytic formula for the "risk premium" governing the resulting climate policy. The formula generalizes simple precautionary savings analysis to more complex economic interactions and it builds the economic intuition for policy making under uncertainty. It clarifies the distinct roles of risk aversion, prudence, characteristics of the damage formulation, and future policy response. We show that an optimal response to uncertainty substantially reduces the risk premium.
- Sprache
-
Englisch
- Erschienen in
-
Series: CESifo Working Paper ; No. 9196
- Klassifikation
-
Wirtschaft
Climate; Natural Disasters and Their Management; Global Warming
Agricultural and Natural Resource Economics; Environmental and Ecological Economics: General
Micro-Based Behavioral Economics: General‡
Computational Techniques; Simulation Modeling
- Thema
-
climate change
uncertainty
risk premium
precautionary savings
prudence
climate policy
dynamic programming
integrated assessment
DICE
recursive utility
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Jensen, Svenn
Traeger, Christian P.
Träger, Christian
- Ereignis
-
Veröffentlichung
- (wer)
-
Center for Economic Studies and ifo Institute (CESifo)
- (wo)
-
Munich
- (wann)
-
2021
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:41 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Jensen, Svenn
- Traeger, Christian P.
- Träger, Christian
- Center for Economic Studies and ifo Institute (CESifo)
Entstanden
- 2021
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