Uncertain climate thresholds and optimal economic growth

• Main Authors: Klaus Keller, Benjamin M. Bolker, David F. Bradford C
• Other Authors: The Pennsylvania State University CiteSeerX Archives
• Format: Text
• Language: English
• Published: 2004
• Subjects: Climate policy; Climate thresholds; Abrupt climate change; North Atlantic thermohaline circulation; Optimal growth model; Learning; Uncertainty; North Atlantic; North atlantic Thermohaline circulation
• Online Access: http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.78.7205; http://www.geosc.psu.edu/~kkeller/Keller_et_al_JEEM_2004.pdf

We explore the combined effects of a climate threshold (a potential ocean thermohaline circulation collapse), parameter uncertainty, and learning in an optimal economic growth model. Our analysis shows that significantly reducing carbon dioxide ðCO2Þ emissions may be justified to avoid or delay even small (and arguably realistic) damages from an uncertain and irreversible climate change—even when future learning about the system is considered. Parameter uncertainty about the threshold specific damages and the CO2 level triggering a threshold can act to decrease near-term CO2 abatements that maximize expected utility.