TY - JOUR
T1 - Accounting for global warming risks
T2 - Resource management under event uncertainty
AU - Tsur, Yacov
AU - Zemel, Amos
PY - 1996
Y1 - 1996
N2 - Optimal management of atmospheric pollution is discussed with a special emphasis on the uncertainty concerning the occurrence of undesirable events associated with the greenhouse effect. The uncertainty considered here stems from our ignorance of the exact pollution level required to trigger the event rather than from the genuinely stochastic nature of the processes involved. Taking atmospheric pollution level as the state variable, it is found that uncertainty implies the existence of an equilibrium interval, within which the emission rate of the greenhouse gases should be kept equal to the natural removal rate of these gases. Processes initiated outside the equilibrium interval must converge monotonically to its nearest endpoint. The determination of the interval requires no knowledge of the optimal policy. In contrast, ignoring event occurrence risk implies a single equilibrium level, attracting the optimal process from any initial level.
AB - Optimal management of atmospheric pollution is discussed with a special emphasis on the uncertainty concerning the occurrence of undesirable events associated with the greenhouse effect. The uncertainty considered here stems from our ignorance of the exact pollution level required to trigger the event rather than from the genuinely stochastic nature of the processes involved. Taking atmospheric pollution level as the state variable, it is found that uncertainty implies the existence of an equilibrium interval, within which the emission rate of the greenhouse gases should be kept equal to the natural removal rate of these gases. Processes initiated outside the equilibrium interval must converge monotonically to its nearest endpoint. The determination of the interval requires no knowledge of the optimal policy. In contrast, ignoring event occurrence risk implies a single equilibrium level, attracting the optimal process from any initial level.
KW - Event uncertainty
KW - Global warming
KW - Resource management
UR - http://www.scopus.com/inward/record.url?scp=0030160418&partnerID=8YFLogxK
U2 - 10.1016/0165-1889(95)00900-0
DO - 10.1016/0165-1889(95)00900-0
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AN - SCOPUS:0030160418
SN - 0165-1889
VL - 20
SP - 1289
EP - 1305
JO - Journal of Economic Dynamics and Control
JF - Journal of Economic Dynamics and Control
IS - 6-7
ER -