Volume 78, Number 1, 157-179, DOI: 10.1007/s10584-006-9092-8

Optimal Technology R&D in the Face of Climate Uncertainty

Erin Baker, Leon Clarke and John Weyant

From the issue entitled "Economy, Politics and Institutions: From Adaptation to Adaptive Management in Climate Change"

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Abstract

This paper explores optimal near-term technology R&D in the face of uncertain damages caused by the buildup of greenhouse gases. The paper puts particular emphasis on understanding how optimal near-term R&D expenditures might vary based on the technologies pursued in the R&D program. The exploration is conducted in the context of varying impacts from R&D on the global abatement cost function. The R&D planning problem is considered first within a theoretical framework and is then pursued in a stylized application using the DICE model. The paper provides intuition into the circumstances under which near-term technology R&D might increase or decrease under uncertainty, thereby serving as a hedge against climate uncertainty.

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