Robust Control in Global Warming Management: An Analytical Dynamic Integrated Assessment

Hennlock, Magnus

doi:10.2139/ssrn.1398905

Cited by 18 publications

(18 citation statements)

References 52 publications

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“…This has also been found to be the case with insurance companies (Kunreuther and Hogarth 1992). If governmental policy should reflect these preferences, it suggests an even higher WTP to reduce climate catastrophe risk than would be found in the risk premium calculations and would be a "shadow ambiguity premium" on the SCC (Hennlock 2009). This premium could be calculated through the discount rate as well, such that when the growth rate is uncertain, there is both a risk premium and an ambiguity premium correction to the social discount rate (Millner et al 2010).…”

Section: Defining a Risk Premiummentioning

confidence: 70%

Risk Premia and the Social Cost of Carbon: A Review

2011

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Reducing greenhouse gas emissions not only lowers expected damages from climate change but also reduces the risk of catastrophic impacts. However, estimates of the social cost of carbon, which measures the marginal value of carbon dioxide abatement, often do not capture this risk reduction benefit. Risk-averse individuals are willing to pay a risk premium, an additional amount beyond the difference in expected damages, to reduce risks. The authors review methods used and estimates obtained for calculating a risk premium to be included in the social cost of carbon. While more research is needed in this area, work to date suggests a positive, and potentially substantial, risk premium on the social cost of carbon is warranted. Special IssueThe Social Cost of Carbon JEL Q54 Keywords Climate change; social cost of carbon; risk premium Correspondence Carolyn Kousky, Resources for the Future,

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Section: Defining a Risk Premiummentioning

confidence: 70%

Risk Premia and the Social Cost of Carbon: A Review

2011

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“…This has also been found to be the case with insurance companies (Kunreuther and Hogarth 1992). If governmental policy should reflect these preferences, it suggests an even higher WTP to reduce climate catastrophe risk than would be found in the risk premium calculations and would be a -shadow ambiguity premium‖ on the SCC (Hennlock 2009). This premium could be calculated through the discount rate as well, such that when the growth rate is uncertain, there is both a risk premium and an ambiguity premium correction to the social discount rate (Millner, Dietz et al 2010).…”

mentioning

confidence: 69%

Risk Premia and the Social Cost of Carbon: A Review

2011

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may Resources for the Future and Delft University of TechnologyAbstract Reducing greenhouse gas emissions not only lowers expected damages from climate change but also reduces the risk of catastrophic impacts. However, estimates of the social cost of carbon, which measures the marginal value of carbon dioxide abatement, often do not capture this risk reduction benefit. Risk-averse individuals are willing to pay a risk premium, an additional amount beyond the difference in expected damages, to reduce risks. The authors review methods used and estimates obtained for calculating a risk premium to be included in the social cost of carbon. While more research is needed in this area, work to date suggests a positive risk premium on the social cost of carbon is warranted.

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“…Moreover, Weitzman's characterization of climate policy is incomplete because it considers the impacts of climate change but ignores the impacts of greenhouse gases (GHG) emissions reduction. As shown by Hennlock (2009), this materially affects the results. Intuitively, the reasoning is something as follows.…”

Section: Introductionmentioning

confidence: 96%

Climate Policy Under Fat-Tailed Risk: An Application of Dice

Hwang

Reynès

Tol

2013

Environ Resource Econ

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Uncertainty plays a significant role in evaluating climate policy, and fat-tailed uncertainty may dominate policy advice. Should we make our utmost effort to prevent the arbitrarily large impacts of climate change under deep uncertainty? In order to answer to this question, we propose a new way of investigating the impact of (fat-tailed) uncertainty on optimal climate policy: the curvature of the optimal carbon tax against the uncertainty. We find that the optimal carbon tax increases as the uncertainty about climate sensitivity increases, but it does not accelerate as implied by Weitzman's Dismal Theorem. We find the same result in a wide variety of sensitivity analyses. These results emphasize the importance of balancing the costs of climate change against its benefits, also under deep uncertainty.

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Robust Control in Global Warming Management: An Analytical Dynamic Integrated Assessment

Cited by 18 publications

References 52 publications

Risk Premia and the Social Cost of Carbon: A Review

Risk Premia and the Social Cost of Carbon: A Review

Risk Premia and the Social Cost of Carbon: A Review

Climate Policy Under Fat-Tailed Risk: An Application of Dice

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