Climate Engineering Under Deep Uncertainty and Heterogeneity

30 Pages Posted: 27 Aug 2016

See all articles by Johannes Emmerling

Johannes Emmerling

CMCC - Centro Euro-Mediterraneo sui Cambiamenti Climatici - European Institute onEconomy and the Environment (EIEE)

Vassiliki Manoussi

Athens University of Economics and Business

Anastasios Xepapadeas

Athens University of Economics and Business; University of Bologna - School of Economics, Management, and Statistics

Date Written: August 26, 2016

Abstract

Climate Engineering, and in particular Solar Radiation Management (SRM) has become a widely discussed climate policy option to study in recent years. However, its potentially strategic nature and unforeseen side effects provide major policy and scientific challenges. We study the role of the SRM implementation and its strategic dimension in a model with two heterogeneous countries with the notable feature of model misspecification on the impacts from SRM. We find that deep uncertainty leads to a reduction in SRM deployment both under cooperation and strategic behavior, which is a more relevant issue if countries act strategically. Furthermore, we demonstrate that the heterogeneity in impacts from SRM has an asymmetric effect on the optimal policy and could typically lead to unilateral SRM implementation. We also consider heterogeneous degrees of ambiguity aversion, in which case the more confident country only will use SRM.

Keywords: Climate Change, Solar Radiation Management, Uncertainty, Robust Control, Differential Game

JEL Classification: Q53, Q54

Suggested Citation

Emmerling, Johannes and Manoussi, Vassiliki and Xepapadeas, Anastasios, Climate Engineering Under Deep Uncertainty and Heterogeneity (August 26, 2016). FEEM Working Paper No. 52.2016, Available at SSRN: https://ssrn.com/abstract=2830437 or http://dx.doi.org/10.2139/ssrn.2830437

Johannes Emmerling (Contact Author)

CMCC - Centro Euro-Mediterraneo sui Cambiamenti Climatici - European Institute onEconomy and the Environment (EIEE) ( email )

Via Bergognone, 34
Milan
Italy

Vassiliki Manoussi

Athens University of Economics and Business ( email )

76 Patission Street
Athens, 104 34
Greece

Anastasios Xepapadeas

Athens University of Economics and Business ( email )

76 Patission Street
Athens, 104 34
Greece

University of Bologna - School of Economics, Management, and Statistics ( email )

Piazza Scaravilli 1
40126 Bologna, fc 47100
Italy

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