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Evolutionary Analysis of Climate Policy and Renewable Energy: Heterogeneous Agents, Relative Welfare and Social Network

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  • Nannen, Volker
  • van den Bergh, Jeroen C. J. M.

Abstract

We demonstrate how an evolutionary agent-based model can be used to evaluate climate policies that take the heterogeneity of strategies of individual agents into account. An essential feature of the model is that the fitness of an economic strategy is determined by the relative welfare of the associated agent as compared to its immediate neighbors in a social network. This enables the study of policies that affect relative positions of individuals. We formulate two innovative climate policies, namely `prizes', altering directly relative welfare, and `advertisement', which influences the social network of interactions. The policies are illustrated using a simple model of global warming where a resource with a negative environmental impact---fossil energy---can be replaced by an environmentally neutral yet less cost effective alternative, namely renewable energy. It is shown that the general approach enlarges the scope of economic policy analysis.

Suggested Citation

  • Nannen, Volker & van den Bergh, Jeroen C. J. M., 2008. "Evolutionary Analysis of Climate Policy and Renewable Energy: Heterogeneous Agents, Relative Welfare and Social Network," MPRA Paper 25881, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:25881
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    References listed on IDEAS

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    Cited by:

    1. Safarzynska, Karolina & van den Bergh, Jeroen C.J.M., 2010. "Evolving power and environmental policy: Explaining institutional change with group selection," Ecological Economics, Elsevier, vol. 69(4), pages 743-752, February.
    2. Nathalie Lazaric & Kevin Maréchal, 2010. "Overcoming inertia: insights from evolutionary economics into improved energy and climate policy," Post-Print hal-00452205, HAL.
    3. Kevin Marechal & Nathalie Lazaric, 2010. "Overcoming inertia: insights from evolutionary economics into improved energy and climate policies," Climate Policy, Taylor & Francis Journals, vol. 10(1), pages 103-119, January.

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    More about this item

    Keywords

    agent-based modeling; behavioral economics; climate policy; evolutionary economics; relative welfare; social network;
    All these keywords.

    JEL classification:

    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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