Global warming and extreme events: rethinking the timing and intesity of environmental policy

Yu-Fu Chen, Michael Funke

    Research output: Working paperDiscussion paper

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    Abstract

    The possibility of low-probability extreme events has reignited the debate over the optimal intensity and timing of climate policy. In this paper we therefore contribute to the literature by assessing the implications of low-probability extreme events on environmental policy in a continuous-time real options model with “tail risk”. In a nutshell, our results indicate the importance of tail risk and call for foresighted pre-emptive climate policies.
    Original languageEnglish
    PublisherUniversity of Dundee
    Publication statusPublished - 2010

    Publication series

    NameDundee Discussion Papers in Economics
    PublisherUniversity of Dundee
    No.236
    ISSN (Print)1473-236X

    Keywords

    • Climate policy
    • Extreme events
    • Real options
    • Levy process

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    Chen, Y-F., & Funke, M. (2010). Global warming and extreme events: rethinking the timing and intesity of environmental policy. (Dundee Discussion Papers in Economics; No. 236). University of Dundee.