Title Simulating conditions leading to strengthening or weakening of climate change policies
 Collaborators Hadi Dowlatabadi (CMU)
 Keywords climate change, integrated assessment modeling, climate policy, regulatory compliance, international regulations
 Abstract

I suspect that human beings are risk averse. This risk aversion can come about as a consequence of a traditionally defined utility function with a negative first derivative. Or, it may be that our decisions are motivated by the desire to preserve the rights of others (who may not necessarily have a voice in the decision-making process). The outcome is the same, we are willing to pay abatement costs which are on average higher than the expected benefits of the policy. A key question for me is under what circumstance might we revise our ideas of what level of abatement is desirable.

It is clear that the general public is quick to recognize extreme climate events and their impacts. There is often untold difficulty in attributing the occurrence of such events to anthropogenic climate change, but such attributions are common. Acute events are usually localized but can easily lead to damages that approach the magnitude of a locality's wealth. The success of disaster relief is a measure of how neighboring regions and the global community are relatively unaffected by the acute event. Much as insurance works, the small premia of the many pay to compensate the losses of the few.

Climate policy is a form of insurance payment. We see the devastation of hurricane Mitch or the floods of China and decide that we need a tighter reign on GHG emissions and feared climate change. However, the occurrence of an acute event in one locality is unlikely to lead to a global movement to strengthen climate mitigation efforts. I am using the stochastic regional impact generators in ICAM to explore this question and estimate the probability of spontaneous tightening of climate abatement regulations.

A related issue that I am investigating is what will the public do when they feel their investments in climate change mitigation has not offered them tangible relief? Imagine a future in which carbon taxes have been in place for some time, they are felt to be reducing average welfare, and acute events occur causing significant additional losses. Would the public be motivated to abandon the mitigation policy or tighten it further? I am using the literature on tax rebellions and international regulations to understand the conditions when a region may drop out of the global accord to limit climate change. Of course, depending on the impact of such action, the whole accord may collapse due to the infeasibility of effective climate control by the remaining coalition.