1,354,879 research outputs found
Regional Climate Change Policy Under Positive Feedbacks and Strategic Interactions
No full textThe surface albedo feedback, along with heat and moisture transport from the Equator to the Poles, is associated with polar amplification which is a well-established scientific fact. The present paper extends (Brock and Xepapadeas in Eur Econ Rev 94:263–282, 2017) to a non-cooperative framework with polar amplification, where regions decide emissions by maximizing own welfare. This can be regarded as a case of regional non-cooperation regarding climate change. Open loop and feedback solutions are derived and compared, in terms of temperature paths and welfare, with the cooperative solution. Carbon taxes which could bridge the gap between cooperative and non-cooperative emissions path are also derived. Finally, the framework is extended to a Ramsey set-up in which it is shown how the regional climate model can be coupled with standard optimal growth models. Numerical simulations confirm the theoretical results and provide insights about the size and the direction of deviations between the cooperative and the non-cooperative solutions
Managing Interacting Populations under Time Scale Separation
No full textAbstract. Renewable resource modeling is usually characterized by Q2
different time scales where some state variables such as biomass may evolve
relatively faster than other state variables such as carrying capacity. A strong
form of time scale separation (STSS) means that a slowly changing variable
is treated as constant over time. Management rules that assume STSS do
not account for a time scale externality and this may induce inefficiencies in
resource management. In the current work, we study multispecies resource
management under time scale separation by adopting the framework of singular
perturbation reduction methods. By extending recent work by Vardas and
Xepapadeas [2015] to interacting populations, we study regulation with full
internalization of the time scale externality. We further study regulation and
noncooperative outcomes under STSS and identify deviations in harvesting
and biomass paths among these cases. Deviations indicate the inefficiencies
associated with adopting STS
Natural Resource Management: A Network Perspective
No full textThis paper studies the role of social networks in the management of natural resources. We consider a finite number of agents who exploit a specific natural resource. Harvesting is subject to three external effects, namely resource stock externalities, crowding externalities, and collaboration spillovers. We show that the structure of the social network—defined by the presence of collaboration links between individual agents—determines the equilibrium and the optimal harvesting amount. We then allow the agents to make decisions about creating or eliminating cooperation links, which endogenizes the structure of the network and is proved to affect total harvesting and aggregate welfare. Conservation plans are shown to change the regulator’s objective and increase even further the gap between the decentralized and the optimal outcomes. We show that the optimal policy depends explicitly on the structure of the network and the ‘centrality’ of the associated agents. Finally, introducing heterogeneity is proved to affect both individual profits and the incentives to create cooperation links
Climate change policy under polar amplification
No full textPolar amplification is an established scientific fact which has been associated with the surface albedo feedback and with heat and moisture transport from the Equator to the Poles. In this paper we unify a two-box climate model, which allows for heat and moisture transport from the southern region to the northern region, with an economic model of welfare optimization. Our main contribution is to show that by ignoring spatial heat and moisture transport and the resulting polar amplification, the regulator may overestimate or underestimate the tax on greenhouse gas emissions. The direction of bias depends on the relations between marginal damages from temperature increase in each region. We also determine the welfare cost when a regulator mistakenly ignores polar amplification. Numerical simulations confirm our theoretical results, while ballpark estimates indicate that the tax bias could be as high as 20%, while welfare cost could reach 2% of global effective steady-state consumption
On the coevolution of economic and ecological systems
No full textThis review provides a description of common and distinct characteristics of economic and ecological systems; examples of the ways in which these characteristics can be incorporated into models adequately describing the coevolution of the two-component systems to produce a unified ecological-economic system in time, space, and appropriate scale; and a discussion of policy design when the policy maker takes into account this coevolution, along with potential biases when the coevolution is ignored. We propose the development of integrated assessment models of the coevolving systems that will embody the variety of common and distinct characteristics identified in this survey. We expect that such an approach will provide useful insights into the efficient management of coevolving ecological-economic systems
Modeling coupled climate, ecosystems, and economic systems
No full textHuman economies and ecosystems form a coupled system coevolving in time and space, since human economies use ecosystems services and at the same time affect ecosystems through their production and consumption activities. The study of the interactions between human economies and ecosystems is fundamental for the efficient use of natural resources and the protection of the environment. This necessitates the development and use of models capable of tracing the main interactions, links and feedbacks. In developing this chapter, our objective was to focus on a segment of rapidly developing literature on coupled ecological/economic models with an emphasis on climate change. The advantage of this approach is that it introduces the reader to a very important current research topic, but it also allows, by using climate as the reference ecosystem, the exploration of new modeling approaches which are relevant and useful for the modeling of other types of coupled ecological/economic systems. These include modeling of deep structural uncertainty by using robust control methods, exploring modeling through cumulative carbon budgeting, studying spatial transport phenomena and spatial aspects in economic/ecological modeling
Regional climate policy under deep uncertainty: Robust control and distributional concerns
No full textWe study climate change policies using the novel pattern scaling approach of regional transient climate response in order to develop a regional economy-climate model under conditions of deep uncertainty. We associate welfare weights with regions and analyze cooperative outcomes derived by the social planner's solution at the regional scale. Recent literature indicates that damages are larger in low latitude (warmer) areas and are projected to become relatively even larger in low latitude areas than at temperate latitudes. Under deep uncertainty, robust control policies are more conservative regarding emissions and, when regional distributional weights are introduced, carbon taxes are lower in the relatively poorer region. Mild concerns for robustness are welfare improving for the poor region, while strong concerns have welfare cost for all regions. We show that increasing regional temperatures will increase resources devoted to learning, in order to reduce deep uncertainty
Climate change financial risks: Implications for asset pricing and interest rates
No full textIn addition to tail macroeconomic events (e.g. wars, financial crises and pandemics), climate change poses a
threat to financial stability — with extreme climatic events increasing in frequency and intensity and policy
risks putting pressure on asset valuations. We study the effect of a changing climate on asset prices and interest
rates through the lens of a dynamic CAPM with rare disasters, time-varying risk and recursive preferences. In
our model, a changing climate makes tail events more frequent and less predictable, increasing the premium
of climate risk; interestingly, this change may not be fully reflected in the overall market risk premium that
includes both components of risk: macroeconomic and environmental. Our results also support the hypothesis
of a declining real rate of interest as the planet warms, while the increasing risk of climate policy reduces the
participation of brown assets in the market portfolio
The Economy, Climate Change and Infectious Diseases: Links and Policy Implications
No full textThis short paper provides a modeling framework for unifying the economy, climate change and the outbreak of infectious diseases such as the recent COVID-19 pandemic. We stress that continuous growth of consumption activities, capital accumulation and climate change could increase the potential of the epidemic, its contact number or the probability of its arrival. This framework of analysis allows us to think of infectious disease policies in two stages. In the short run, containment policies like social distancing could help to stop the epidemic. In the medium and the long run, economic policies could help to reduce the potential of the epidemic or the probability of its emergence
Spatial growth theory: Optimality and spatial heterogeneity
No full textSpatiotemporal dynamics are introduced in a standard Ramsey model of optimal growth in which capital moves toward locations where the marginal productivity of capital is rel- atively higher and initiate a study of the effects of nonlinear capital transport in terms of a linearized analysis around steady state solution solutions. The potential spatial heterogeneity of optimal growth, as seen from the point of view of an optimizing social planner, is examined. Our results suggest that for a high utility discount rate, the spatial capital flows induce the emergence of optimal spatial patterns, while for a low utility discount, a flat earth steady state is socially optimal. Furthermore, when spa- tial heterogeneities exist due to total factor productivity differences across locations, we identify conditions under which the spatial capital flows could intensify or weaken spatial inequalities
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