The Benefits of Cooperation Under Uncertainty: the Case of Climate Change |
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Authors: | Thierry Bréchet Julien Thénié Thibaut Zeimes Stéphane Zuber |
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Institution: | 1. CORE, Chair Lhoist Berghmans in Environmental Economics and Management, Université catholique de Louvain, 34 voie du Roman pays, 1348, Louvain-la-Neuve, Belgium 2. ORDECSYS Company, Chêne-Bougeries, Switzerland
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Abstract: | This article presents an analysis of the behaviour of countries defining their climate policies in an uncertain context. The analysis is made using the S-CWS model, a stochastic version of an integrated assessment growth model. The model includes a stochastic definition of the climate sensitivity parameter. We show that the impact of uncertainty on policy design critically depends on the shape of the damage function. We also examine the benefits of cooperation in the context of uncertainty: We highlight the existence of an additional benefit of cooperation, namely risk reduction. |
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