Sensitivity and Cost-benefit Analyses of Emission-constrained Technological Growth Under Uncertainty in Natural Emissions

Rovenskaya, E. ORCID: https://orcid.org/0000-0002-2761-3443 (2005). Sensitivity and Cost-benefit Analyses of Emission-constrained Technological Growth Under Uncertainty in Natural Emissions. IIASA Interim Report. IIASA, Laxenburg, Austria: IR-05-051

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Abstract

The paper addresses the issue of control of world technological development under prescribed constraints on the emission of greenhouse gases. We use a stylized mathematical model of the world GDP whose growth leads to the increase of industrial emission provided in investment in "cleaning" technology acts as a control parameter in the model. The optimal control maximizing a standard economic utility index is described. Two components in total emission are distinguished: industrial emission and natural emission. It is assumed that natural emission is uncertain. We use IPCC scenarios for the world GDP and fossil fuel emission to calibrate the model. For a given range of uncertain values of natural emission, we construct a bundle of optimal trajectories of the GDP, industrial emission, "production" technology stock and "cleaning" technology stock. We analyze the sensitivity of the optimal trajectories and optimal utility to variations in the values of natural emission. Finally, we introduce a modified control policy assuming reduction of natural emission prior to intensive development of "cleaning" technology, and carry out its cost-benefit analysis.

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