IDEAS home Printed from https://ideas.repec.org/a/aen/journl/1996v17-01-a05.html
   My bibliography  Save this article

Incorporating Investment Uncertainty into Greenhouse Policy Models

Author

Listed:
  • John R. Birge
  • Charles H. Rosa

Abstract

Greenhouse gas policy decisions require comprehensive understanding of atmospheric, economic, and social impacts. Many studies have considered the effects of atmospheric uncertainty in global warming, but economic uncertainties, have received Less analysis. We consider a key component of economic uncertainty: the return on investments in new technologies. Using a mathematical! programming model, we show that ignoring uncertainty in technology investment policy may lead to decreases as great as 2 percent in overall expected economic activity in the U.S. with even higher losses in possible future scenarios. These results indicate that both federal and private technology investment policies should be based on models explicitly incorporating uncertainty.

Suggested Citation

  • John R. Birge & Charles H. Rosa, 1996. "Incorporating Investment Uncertainty into Greenhouse Policy Models," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 79-89.
    • Handle: RePEc:aen:journl:1996v17-01-a05
    as

    Download full text from publisher

    File URL: http://www.iaee.org/en/publications/ejarticle.aspx?id=1218
    Download Restriction: Access to full text is restricted to IAEE members and subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Francois V. Louveaux, 1980. "A Solution Method for Multistage Stochastic Programs with Recourse with Application to an Energy Investment Problem," Operations Research, INFORMS, vol. 28(4), pages 889-902, August.
    2. LOUVEAUX, François V., 1980. "A solution method for multistage stochastic programs with recourse with application to an energy investment problem," LIDAM Reprints CORE 415, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. Alan Manne & Richard Richels, 1992. "Buying Greenhouse Insurance: The Economic Costs of CO2 Emission Limits," MIT Press Books, The MIT Press, edition 1, volume 1, number 026213280x, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. W. Botzen & Jeroen Bergh, 2014. "Specifications of Social Welfare in Economic Studies of Climate Policy: Overview of Criteria and Related Policy Insights," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 58(1), pages 1-33, May.
    2. Lin, Tyrone T. & Ko, Chuan-Chuan & Yeh, Hsin-Ni, 2007. "Applying real options in investment decisions relating to environmental pollution," Energy Policy, Elsevier, vol. 35(4), pages 2426-2432, April.
    3. van den Bergh, Jeroen C.J.M., 2008. "Optimal diversity: Increasing returns versus recombinant innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 68(3-4), pages 565-580, December.
    4. Svensson, Elin & Berntsson, Thore & Strömberg, Ann-Brith & Patriksson, Michael, 2009. "An optimization methodology for identifying robust process integration investments under uncertainty," Energy Policy, Elsevier, vol. 37(2), pages 680-685, February.
    5. Kanudia, Amit & Loulou, Richard, 1998. "Robust responses to climate change via stochastic MARKAL: The case of Quebec," European Journal of Operational Research, Elsevier, vol. 106(1), pages 15-30, April.
    6. Bistline, John E., 2015. "Electric sector capacity planning under uncertainty: Climate policy and natural gas in the US," Energy Economics, Elsevier, vol. 51(C), pages 236-251.
    7. Baranzini, Andrea & Chesney, Marc & Morisset, Jacques, 2003. "The impact of possible climate catastrophes on global warming policy," Energy Policy, Elsevier, vol. 31(8), pages 691-701, June.
    8. van den Bergh, Jeroen C. J. M., 2004. "Optimal climate policy is a utopia: from quantitative to qualitative cost-benefit analysis," Ecological Economics, Elsevier, vol. 48(4), pages 385-393, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Unai Aldasoro & María Merino & Gloria Pérez, 2019. "Time consistent expected mean-variance in multistage stochastic quadratic optimization: a model and a matheuristic," Annals of Operations Research, Springer, vol. 280(1), pages 151-187, September.
    2. Ningyuan Chen & Steven Kou & Chun Wang, 2018. "A Partitioning Algorithm for Markov Decision Processes with Applications to Market Microstructure," Management Science, INFORMS, vol. 64(2), pages 784-803, February.
    3. Bülbül, Kerem & Noyan, Nilay & Erol, Hazal, 2021. "Multi-stage stochastic programming models for provisioning cloud computing resources," European Journal of Operational Research, Elsevier, vol. 288(3), pages 886-901.
    4. Maqsood, Imran & Huang, Guo H. & Scott Yeomans, Julian, 2005. "An interval-parameter fuzzy two-stage stochastic program for water resources management under uncertainty," European Journal of Operational Research, Elsevier, vol. 167(1), pages 208-225, November.
    5. Semih Atakan & Suvrajeet Sen, 2018. "A Progressive Hedging based branch-and-bound algorithm for mixed-integer stochastic programs," Computational Management Science, Springer, vol. 15(3), pages 501-540, October.
    6. Zhenfang Liu & Yang Zhou & Gordon Huang & Bin Luo, 2019. "Risk Aversion Based Inexact Stochastic Dynamic Programming Approach for Water Resources Management Planning under Uncertainty," Sustainability, MDPI, vol. 11(24), pages 1-22, December.
    7. Xie, Fei & Huang, Yongxi, 2018. "A multistage stochastic programming model for a multi-period strategic expansion of biofuel supply chain under evolving uncertainties," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 111(C), pages 130-148.
    8. Weini Zhang & Hamed Rahimian & Güzin Bayraksan, 2016. "Decomposition Algorithms for Risk-Averse Multistage Stochastic Programs with Application to Water Allocation under Uncertainty," INFORMS Journal on Computing, INFORMS, vol. 28(3), pages 385-404, August.
    9. Angelos Georghiou & Angelos Tsoukalas & Wolfram Wiesemann, 2019. "Robust Dual Dynamic Programming," Operations Research, INFORMS, vol. 67(3), pages 813-830, May.
    10. Bakker, Hannah & Dunke, Fabian & Nickel, Stefan, 2020. "A structuring review on multi-stage optimization under uncertainty: Aligning concepts from theory and practice," Omega, Elsevier, vol. 96(C).
    11. Pablo Salas, 2013. "Literature Review of Energy-Economics Models, Regarding Technological Change and Uncertainty," 4CMR Working Paper Series 003, University of Cambridge, Department of Land Economy, Cambridge Centre for Climate Change Mitigation Research.
    12. Michael Toman, 1998. "Research Frontiers in the Economics of Climate Change," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 11(3), pages 603-621, April.
    13. Marc Vielle & Alain L. Bernard, 1998. "Un exemple d'utilisation : le coût de politiques de réduction des gaz à effet de serre," Économie et Prévision, Programme National Persée, vol. 136(5), pages 33-48.
    14. Oliver Bettis & Simon Dietz & Nick Silver, 2015. "The risk of climate ruin," GRI Working Papers 217, Grantham Research Institute on Climate Change and the Environment.
    15. Chang, Charles W., 2014. "DICESC: Optimal Policy in a Stochastic Control Framework," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170831, Agricultural and Applied Economics Association.
    16. Jennifer Morris & Vivek Srikrishnan & Mort Webster & John Reilly, 2018. "Hedging Strategies: Electricity Investment Decisions under Policy Uncertainty," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    17. Baker, Erin, 2005. "Uncertainty and learning in a strategic environment: global climate change," Resource and Energy Economics, Elsevier, vol. 27(1), pages 19-40, January.
    18. Rosendahl, Knut Einar, 2004. "Cost-effective environmental policy: implications of induced technological change," Journal of Environmental Economics and Management, Elsevier, vol. 48(3), pages 1099-1121, November.
    19. Terry Barker & Jonathan Köhler & Marcelo Villena, 2002. "Costs of greenhouse gas abatement: meta-analysis of post-SRES mitigation scenarios," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 5(2), pages 135-166, June.
    20. Rose, Steven K., 2014. "Integrated assessment modeling of climate change adaptation in forestry and pasture land use: A review," Energy Economics, Elsevier, vol. 46(C), pages 548-554.

    More about this item

    JEL classification:

    • F0 - International Economics - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aen:journl:1996v17-01-a05. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: David Williams (email available below). General contact details of provider: https://edirc.repec.org/data/iaeeeea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.