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Ambiguity reduction by objective model selection, with an application to the costs of the EU 2030 climate targets

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posted on 2023-06-08, 22:25 authored by Richard TolRichard Tol
I estimate the cost of meeting the EU 2030 targets for greenhouse gas emission reduction, using statistical emulators of ten alternative models. Assuming a first-best policy implementation, I find that total and marginal costs are modest. The statistical emulators allow me to compute the risk premiums, which are small, because the EU is rich and the policy impact is small. The ensemble of ten models allows me to compute the ambiguity premium, which is small for the same reason. I construct a counterfactual estimate of recent emissions without the climate policy and use that to test the predictive skill of the ten models. The models that show the lowest cost of emission reduction also have the lowest skill for Europe in recent times.

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Publication status

  • Published

File Version

  • Published version

Journal

Energies

ISSN

1996-1073

Publisher

MDPI

Issue

11

Volume

7

Page range

6886-6896

Department affiliated with

  • Economics Publications

Full text available

  • Yes

Peer reviewed?

  • Yes

Legacy Posted Date

2015-09-08

First Open Access (FOA) Date

2015-09-08

First Compliant Deposit (FCD) Date

2015-09-08

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