Form Submission: Participation Entry

Research Day Entry

Climate Change Uncertainty, and Learning

Economists remain confused about how mitigation should respond to the daunting uncertainty about the long-term impacts of climate change. Some argue precautionary actions to avoid potentially devastating climate damages, while others maintain almost no effect of uncertainty on mitigation or the social cost of carbon. This study examines how climate change uncertainty alters optimal strategy climate-economy models suggest. With simplified examples, we found that uncertainty affects mitigation plan depending on the abatement cost function. One surprising result is that uncertainty will lead milder mitigation strategy with the ceiling price. Potentially severe climate scenario simply causes the substitution clean energy for fossil fuels sooner. We also measure the value of perfect information. Information is valuable by allowing policy maker to tailor mitigation to the actual climate system. It is measured extremely high, which suggests the importance of investing money in research to resolve climate change uncertainty.