Comparing Alternative Policies Against Environmental Catastrophes
21 Pages Posted: 30 Jan 2017
Date Written: January 2017
We construct a model with three features important in the context of major environmental catastrophes: (1) the distribution of possible damage has a fat tail, (2) the probability of the catastrophic event increases as greenhouse gases accumulate, (3) a technological solution may emerge making conservation efforts unnecessary. We solve the model numerically for plausible values of the parameters, and evaluate the tradeoffs between alternative policies such as prevention, mitigation, and technological fixes.
Keywords: catastrophic risk, climate change
JEL Classification: Q54, Q58
Suggested Citation: Suggested Citation