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Uncertain climate thresholds and optimal economic growth. (English) Zbl 1161.91450
Summary: We explore the combined effects of a climate threshold (a potential ocean thermohaline circulation collapse), parameter uncertainty, and learning in an optimal economic growth model. Our analysis shows that significantly reducing carbon dioxide (CO\(_2\)) emissions may be justified to avoid or delay even small (and arguably realistic) damages from an uncertain and irreversible climate change-even when future learning about the system is considered. Parameter uncertainty about the threshold specific damages and the CO\(_2\) level triggering a threshold can act to decrease near-term CO\(_2\) abatements that maximize expected utility.

MSC:
91B62 Economic growth models
91B76 Environmental economics (natural resource models, harvesting, pollution, etc.)
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