Abstract

http://ssrn.com/abstract=1992660
 
 

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Tipping Points in a Dynamic Stochastic IAM


Thomas S. Lontzek


University of Zurich; Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP)

Yongyang Cai


Stanford University - The Hoover Institution on War, Revolution and Peace; Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP); University of Chicago - Becker Friedman Institute

Kenneth L. Judd


Stanford University - The Hoover Institution on War, Revolution and Peace; Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP); National Bureau of Economic Research (NBER)

January 18, 2012

RDCEP Working Paper No. 12-03

Abstract:     
We use a dynamic stochastic general equilibrium model of integrated climate and economy (DSICE) to account for abrupt and irreversible climate change. We model a climate shock in the form of a stochastic tipping point. We investigate the impact of the tipping point externality on optimal mitigation policy.

We conclude that the optimal mitigation policy depends on the dynamic pattern of the impact. In the case of abrupt and irreversible climate change with a permanent impact, the optimal policy implies a constant anti-tipping effort to prevent the catastrophe, calling for immediate limitations on emissions.

Number of Pages in PDF File: 18

Keywords: Climate change policy and uncertainty, discounting abrupt and irreversible climate change, tipping points, stochastic IAM

JEL Classification: C63, Q54, D81

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Date posted: January 27, 2012  

Suggested Citation

Lontzek, Thomas S. and Cai, Yongyang and Judd, Kenneth L., Tipping Points in a Dynamic Stochastic IAM (January 18, 2012). RDCEP Working Paper No. 12-03. Available at SSRN: http://ssrn.com/abstract=1992660 or http://dx.doi.org/10.2139/ssrn.1992660

Contact Information

Thomas S. Lontzek (Contact Author)
University of Zurich ( email )
Switzerland
Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP) ( email )
5735 S. Ellis Street
Chicago, IL 60637
United States

Yongyang Cai
Stanford University - The Hoover Institution on War, Revolution and Peace ( email )
Stanford, CA 94305-6010
United States
Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP) ( email )
5735 S. Ellis Street
Chicago, IL 60637
United States

University of Chicago - Becker Friedman Institute ( email )
University of Chicago
Chicago, IL
United States
Kenneth L. Judd
Stanford University - The Hoover Institution on War, Revolution and Peace ( email )
Stanford, CA 94305-6010
United States
Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP) ( email )
5735 S. Ellis Street
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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