Optimal climate policy under the possibility of a catastrophe |
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| Institution: | 1. KU Leuven Kulak, Research Unit Food & Lipids, E. Sabbelaan 53, 8500 Kortrijk, Belgium;2. Leuven Food Science and Nutrition Research Centre (LFoRCe), KU Leuven, Kasteelpark Arenberg 20, 3001 Leuven, Belgium;3. KU Leuven, Department of Biosystems, MeBioS division, Kasteelpark Arenberg 30, 3001 Leuven, Belgium;4. University of Antwerp, Department of Engineering Management, Prinsstraat 13, 2000 Antwerpen, Belgium;5. Technologiecluster Bioengineering Technology, Campus Brugge, Spoorwegstraat 12 - bus 7913, 8200 Sint-Michiels, Belgium;6. Departement Microbiële en Moleculaire Systemen, KU Leuven, Kasteelpark Arenberg 23 - bus 246, 3001 Leuven, Belgium;7. KU Leuven Kulak, Laboratory Aquatic Biology, E. Sabbelaan 53, 8500 Kortrijk, Belgium;1. Grenoble INP, GAEL, University Grenoble Alpes, CNRS, INRA, Grenoble, France;2. Department of Economics, Ca’ Foscari University of Venice, Italy;3. Department of Business and Economics, Parthenope University of Naples, Italy |
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| Abstract: | This paper concerns optimal emissions of greenhouse gases when catastrophic consequences are possible. A numerical model is presented, which takes into account both continuous climate-feedback damages as well as the possibility of a catastrophic outcome. The possibility of a climate catastrophe is a major argument for greenhouse gas abatement even in absence of continuous damage. Special attention is given to the subjective probability of a catastrophe and the pure rate of time preferences, and implicit values of these parameters are calculated if an emissions stabilisation target is assumed optimal. Finally, the expected value of perfect information about the probability of a catastrophe is estimated. |
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