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Short-term decisions under long-term uncertainty

journal contribution
posted on 2023-06-08, 11:10 authored by Richard TolRichard Tol
The behaviour of future policy-makers substantially influences future greenhouse gas emissions. Uncertainty about the motives of future policy-makers may thus strongly influence the climate policy strategies of current policy-makers. Analytical and numerical analyses in this paper confirm this hypothesis. If current policy-makers want to constrain emissions accumulated over a prolonged period of time, and if future policy-makers tend, with a certain chance, to a less ambitious climate policy, then current policy-makers should intensify their efforts to reduce emissions and the cost of emission reduction. In this setting, if current policy-makers want to meet a cumulative emission contraint in expectation, then the preferred policy trajectory does not qualitatively deviate from one suggested by a standard cost-effective trajectory. If, however, the constraint is to be met with a certain probability, then the importance of early action is enhanced relative to that of postponed action. Costs substantially increase if current policy-makers want to set long-term goals without the full cooperation of future policy-makers.

History

Publication status

  • Published

Journal

Energy Economics

ISSN

0140-9883

Publisher

Elsevier

Issue

5-6

Volume

20

Page range

557-569

Department affiliated with

  • Economics Publications

Full text available

  • No

Peer reviewed?

  • Yes

Legacy Posted Date

2012-04-23

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