Safe policies in an uncertain climate: an application of FUND |
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| Institution: | 1. University of Brescia, Department of Economics and Management, IT-25122 Brescia, Italy;2. University of Bergamo, Department of Management, Economics and Quantitative Methods, IT-24127 Bergamo, Italy;1. Integrated Research on Energy, Environment and Society, University of Groningen, Nijenborgh 6, AG, 9747 Groningen, the Netherlands;2. TNO Energy Transition, Princetonlaan 6, Utrecht 3584 CB, the Netherlands;1. Process Metallurgy Research Group, Faculty of Technology, University of Oulu, Finland;2. Mineral Processing and Agglomeration Lab, Central Metallurgical Research and Development Institute, Cairo, Egypt |
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| Abstract: | Various aspects of the role of uncertainty in greenhouse gas emission reduction policy are analyzed with the integrated assessment model FUND. FUND couples simple models of economy, climate, climate impacts, and emission abatement. Probability distribution functions are assumed for all major parameters in the model. Monte Carlo analyses are used to study the effects of parametric uncertainties. Uncertainties are found to be large and grow over time. Uncertainties about climate change impacts are more serious than uncertainties about emission reduction costs, so that welfare-maximizing policies are stricter under uncertainty than under certainty. This is more pronounced without than with international cooperation. Whether or not countries cooperate with one another is more important than whether or not uncertainty is considered. Meeting exogenously defined emission targets may be more or less difficult under uncertainty than under certainty, depending on the asymmetry in the uncertainty and the central estimate of interest. The major uncertainty in meeting emissions targets in each of a range of possible future is the timing of starting (serious) reduction policies. In a scenario aiming at a stable CO2 concentration of 550 ppm, the start date varies 20 years for Annex I countries, and much longer for non-Annex countries. Atmospheric stabilization at 550 ppm does not avoid serious risks with regard to climate change impacts. At the long term, it is possible to avoid such risks but only through very strict emission control at high economic costs. |
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