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TY  - THES
AU  - Zhao, Yifan
TI  - Preferences under uncertainty in integrated assessment models of the climate and the economy
PB  - Rheinisch-Westfälische Technische Hochschule Aachen
VL  - Dissertation
CY  - Aachen
M1  - RWTH-2024-10802
SP  - 1 Online-Ressource : Illustrationen
PY  - 2024
N1  - Veröffentlicht auf dem Publikationsserver der RWTH Aachen University
N1  - Dissertation, Rheinisch-Westfälische Technische Hochschule Aachen, 2024
AB  - Climate change poses significant challenges that require economic modeling to guide policy decisions. This thesis explores the integration of preferences for uncertainty aversion in climate-economic models. First, we review various frameworks that model risk aversion, such as time-additive CRRA utility, Epstein—Zin preferences, and risk-sensitive preferences, and highlight their advantages and shortcomings through illustrative examples. We specifically investigate two different notions of risk-sensitive preferences, which we refer to as full-path and per-stage robustness. Then, we propose an integrated assessment model of the climate and the economy by extending the Ramsey—Cass—Koopmans economic growth model to include a climate component and accounting for uncertain climate damages in persistent disaster states. The optimal carbon tax is then calculated for different uncertainty-averse preferences. We find that, in our specific climate-economic model, using any of the full-path robust preferences, per-stage robust preferences, or Epstein—Zin preferences results in higher social costs of carbon (SCC) compared to time-additive CRRA utility, with the effect being highest for full-path robust preferences. We denote the difference in SCC between any of the robust preferences and time-additive CRRA utility as the "robustness premium". For our baseline calibration with full-path robust preferences and a rather low robustness parameter of k=5, the SCC is around USD 162 per ton of CO2 in 2020, with a robustness premium of USD 2.20 per ton of CO2. However, we see that depending on the type of robust preferences, the robustness premium can be as high as USD 78.55 per ton of CO2.
LB  - PUB:(DE-HGF)11
DO  - DOI:10.18154/RWTH-2024-10802
UR  - https://publications.rwth-aachen.de/record/996754
ER  -