Time is Running Out: The 2°C Target and Optimal Climate Policies
29 Pages Posted: 6 Dec 2011
Date Written: November 30, 2011
Abstract
The quintessence of recent natural science studies is that the 2°C target can only be achieved with massive emission reductions in the next few years. The central twist of this paper is the addition of this limited time to act into a non-perpetual real options framework analyzing optimal climate policy under uncertainty. The window-of-opportunity modelling setup shows that the limited time to act may spark a trend reversal in the direction of low-carbon alternatives. However, the implementation of a climate policy is evaded by high uncertainty about possible climate pathways.
Keywords: climate policy, CO2 scenarios, non-perpetual real options
JEL Classification: Q510, Q540, D810
Suggested Citation: Suggested Citation