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Regional Climate Change Policy Under Positive Feedbacks and Strategic Interactions

Author

Listed:
  • William Brock

    (University of Wisconsin
    University of Missouri)

  • Anastasios Xepapadeas

    (Athens University of Economics and Business
    University of Bologna)

Abstract

The 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.

Suggested Citation

  • William Brock & Anastasios Xepapadeas, 2019. "Regional Climate Change Policy Under Positive Feedbacks and Strategic Interactions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 72(1), pages 51-75, January.
    • Handle: RePEc:kap:enreec:v:72:y:2019:i:1:d:10.1007_s10640-018-0254-8
    DOI: 10.1007/s10640-018-0254-8
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    Cited by:

    1. Wagener, Florian & de Zeeuw, Aart, 2021. "Stable partial cooperation in managing systems with tipping points," Journal of Environmental Economics and Management, Elsevier, vol. 109(C).
    2. Anastasios Xepapadeas, 2022. "On the optimal management of environmental stock externalities," Proceedings of the National Academy of Sciences, Proceedings of the National Academy of Sciences, vol. 119(24), pages 2202679119-, June.
    3. Elettra Agliardi & Anastasios Xepapadeas, 2019. "Introduction: Special Issue on the Economics of Climate Change and Sustainability," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 72(1), pages 1-4, January.
    4. William Brock & Anastasios Xepapadeas, 2019. "Regional Climate Policy under Deep Uncertainty: Robust Control, Hot Spots and Learning," DEOS Working Papers 1903, Athens University of Economics and Business.
    5. Brock, William & Xepapadeas, Anastasios, 2021. "Regional climate policy under deep uncertainty: robust control and distributional concerns," Environment and Development Economics, Cambridge University Press, vol. 26(3), pages 211-238, June.
    6. William Brock & Anastasios Xepapadeas, 2020. "Spatial Environmental and Resource Economics," DEOS Working Papers 2002, Athens University of Economics and Business.
    7. William Brock & Anastasios Xepapadeas, 2019. "Regional Climate Policy under Deep Uncertainty," DEOS Working Papers 1901, Athens University of Economics and Business.
    8. Karydas, Christos & Xepapadeas, Anastasios, 2022. "Climate change financial risks: Implications for asset pricing and interest rates," Journal of Financial Stability, Elsevier, vol. 63(C).

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    More about this item

    Keywords

    Arctic amplification; Spatial heat and moisture transport; Optimal policy; Emission taxes; Open loop; Feedback Nash equilibrium;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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