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Climate Change Policy under Spatially Structured Ambiguity: Hot Spots and the Precautionary Principle

Author

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  • Athanasios Yannacopoulos
  • Anastasios Xepapadeas

Abstract

In view of the ambiguities and the deep uncertainty associated with climate change, we study the features of climate change policies that account for spatially structured ambiguity. Ambiguity related to the evolution of the natural system is introduced into a coupled economy-climate model with explicit spatial structure due to heat transport across the globe. We seek to answer questions about how spatial robust regulation regarding climate policies can be formulated; what the potential links of this regulation to the weak and strong version of the precautionary principle (PP) are; and how insights about whether it is costly to follow a PP can be obtained. We also study the emergence of hot spots, which are locations where local deep uncertainty may cause robust regulation to break down for the whole spatial domain, or the weak PP to be costly.

Suggested Citation

  • Athanasios Yannacopoulos & Anastasios Xepapadeas, 2013. "Climate Change Policy under Spatially Structured Ambiguity: Hot Spots and the Precautionary Principle," DEOS Working Papers 1332, Athens University of Economics and Business.
    • Handle: RePEc:aue:wpaper:1332
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    File URL: http://wpa.deos.aueb.gr/docs/Climate.Change.Policy..pdf
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    References listed on IDEAS

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    3. Athanassoglou, Stergios & Xepapadeas, Anastasios, 2012. "Pollution control with uncertain stock dynamics: When, and how, to be precautious," Journal of Environmental Economics and Management, Elsevier, vol. 63(3), pages 304-320.
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    5. William A. Brock & Anastasios Xepapadeas & Athanasios N. Yannacopoulos, 2014. "Robust Control of a Spatially Distributed Commercial Fishery," Dynamic Modeling and Econometrics in Economics and Finance, in: Elke Moser & Willi Semmler & Gernot Tragler & Vladimir M. Veliov (ed.), Dynamic Optimization in Environmental Economics, edition 127, pages 215-241, Springer.
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    Cited by:

    1. W.A. Brock & A. Xepapadeas & A.N. Yannacopoulos, 2014. "Optimal Control in Space and Time and the Management of Environmental Resources," Annual Review of Resource Economics, Annual Reviews, vol. 6(1), pages 33-68, October.
    2. E. V. Petracou & A. Xepapadeas & A. N. Yannacopoulos, 2017. "Climate Change and Environmentally Induced Migration Across Regions: Cooperative and Non-cooperative Solutions," Homo Oeconomicus: Journal of Behavioral and Institutional Economics, Springer, vol. 34(2), pages 137-164, November.

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    More about this item

    Keywords

    Ambiguity; Climate change; space; maxmin expected utility; robust control regulation; hot spots; precautionary principle;
    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
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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