Watch Your Step: Optimal Policy in a Tipping Climate. Lemoine, D. & Traeger, C. American Economic Journal: Economic Policy, 6(1):137–166, February, 2014. ![Watch Your Step: Optimal Policy in a Tipping Climate [link]](https://bibbase.org/img/filetypes/link.svg "link")
Paper doi abstract bibtex We investigate the optimal policy response to the possibility of abrupt, irreversible shifts in system dynamics. The welfare cost of a tipping point emerges from the policymaker's response to altered system dynamics. Our policymaker also learns about a threshold's location by observing the system's response in each period. Simulations with a recursive, numerical climate-economy model show that tipping possibilities raise the optimal carbon tax more strongly over time. The resulting policy paths ultimately lower optimal peak warming by up to 0.5°C. Different types of posttipping shifts in dynamics generate qualitatively different optimal pretipping policy paths.
@article{lemoine_watch_2014,
title = {Watch {Your} {Step}: {Optimal} {Policy} in a {Tipping} {Climate}},
volume = {6},
issn = {1945-7731, 1945-774X},
shorttitle = {Watch {Your} {Step}},
url = {http://pubs.aeaweb.org/doi/10.1257/pol.6.1.137},
doi = {10.1257/pol.6.1.137},
abstract = {We investigate the optimal policy response to the possibility of abrupt, irreversible shifts in system dynamics. The welfare cost of a tipping point emerges from the policymaker's response to altered system dynamics. Our policymaker also learns about a threshold's location by observing the system's response in each period. Simulations with a recursive, numerical climate-economy model show that tipping possibilities raise the optimal carbon tax more strongly over time. The resulting policy paths ultimately lower optimal peak warming by up to 0.5°C. Different types of posttipping shifts in dynamics generate qualitatively different optimal pretipping policy paths.},
language = {en},
number = {1},
urldate = {2017-07-24},
journal = {American Economic Journal: Economic Policy},
author = {Lemoine, Derek and Traeger, Christian},
month = feb,
year = {2014},
keywords = {GA, Untagged},
pages = {137--166},
}
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