Anthropogenic greenhouse gas emissions are changing the energy balance of our planet. Various climatic feedbacks make the resulting warming over the next decades and centuries highly uncertain. We quantify how this uncertainty changes the optimal carbon tax in a stochastic dynamic programming...

“Prices versus quantities” (Weitzman 1974), a hugely influential paper, is widely cited (and taught) in current debates about the best policy to reduce greenhouse gas emissions. The paper’s criterion for ranking policies suggests that technological uncertainty favors taxes over cap and...

The integrated assessment literature frequently replicates uncertainty by averaging Monte Carlo runs of deterministic models. This Monte Carlo analysis is, in essence, an averaged sensitivity analyses. The approach resolves all uncertainty before the first time period, drawing parameters from a...

The social discount rate crucially determines optimal mitigation policies. This paper examines two shortcomings of the recent debate and the models on climate change assessment. First, removing an implicit assumption of (intertemporal) risk neutrality reduces the growth effect in social...

The precise consequences of climate change remain uncertain. We incorporate damage uncertainty into a joint model of climate and the economy, an integrated assessment model. First, both the science and the integrated assessment community analyze uncertainty by means of sensitivity analysis and...