Robust Dynamic Energy Use and Climate Change

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dc.contributor.authorLi, Xin
dc.contributor.authorNarajabad, Borghan
dc.contributor.authorLoch-Temzelides, Ted P.
dc.contributor.orgJames A. Baker III Institute for Public Policy
dc.date.accessioned2016-08-19T14:44:11Z
dc.date.available2016-08-19T14:44:11Z
dc.description.abstractWe study a dynamic stochastic general equilibrium model in which agents are concerned about model uncertainty regarding climate change. An externality from greenhouse gas emissions damages the economyﾒs capital stock. We assume that the mapping from climate change to damages is subject to uncertainty, as opposed to risk, and we use robust control theory to study efficiency and optimal policy. We obtain a sharp analytical solution for the implied environmental externality and characterize dynamic optimal taxation. The optimal tax that restores the socially optimal allocation is Pigouvian. We study optimal output growth in the presence and in the absence of concerns about model uncertainty and find that these can lead to substantially different conclusions regarding the optimal emissions and the optimal mix of fossil fuel.
dc.identifier.citationLi, Xin, Narajabad, Borghan and Loch-Temzelides, Ted P.. "Robust Dynamic Energy Use and Climate Change." (2015) James A. Baker III Institute for Public Policy: <a href="http://bakerinstitute.org/research/robust-dynamic-energy-use-and-climate-change/">http://bakerinstitute.org/research/robust-dynamic-energy-use-and-climate-change/</a>.
dc.identifier.urihttps://hdl.handle.net/1911/91269
dc.subjectrobustness
dc.subjectclimate change
dc.subjectmodel uncertainty
dc.subjectdynamic taxation
dc.titleRobust Dynamic Energy Use and Climate Change
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