Download Deterministic Policy Optimization Models

Integration and
Decision-Making Frameworks
for Climate Change Policy
Public Policy Analysis
MS&E 290
March 4, 2004
Overview
• Elements of Integrated Assessment
• Two Types of Integrated Assessment Models
– Policy Optimization
– Policy Evaluation
• Uses of Integrated Assessment Models
• Decision Making Frameworks
– Deterministic (Optimization, Simulation, Tolerable Windows)
– Decision Analysis
– Game Theory
Key Components of Integrated Assessment Models
ATMOSPHERIC COMPOSITION
CLIMATE & SEA LEVEL
Climate
Atmospheric Chemistry
Ocean
Carbon Cycle
HUMAN ACTIVITIES
Energy
System
Agriculture,
Livestock, &
Forestry
Other Human
Systems
Coastal
System
Ocean
* temperature
* sea level
ECOSYSTEMS
Terrestrial
Carbon Cycle
Un-managed
Eco-system
Crops and
Forestry
Hydorlogy
Cost/Benefit Modeling Approach:
Balancing the Costs of Controlling Carbon Emissions
Against the Costs of the Climate impacts They Cause
Marginal Cost
of Climate Impacts
Value/Cost
of
Emissions
Reductions
Marginal Cost
of Emissions Control
Carbon Emissions
Two Kinds of
Integrated Assessment Models
• Policy Optimization Models
– Focused on Finding Optimal Level of Emissions
– Usually Include Impacts at the Aggregate Level
• Policy Evaluation Models
– Focused on Simulating Effects of Policies
– Usually More Detailed Impacts
– Can be Run Backwards - Tolerable Windows Approach
Types of
Integrated Assessment Models
Deterministic Models
Deterministic
Policy Optimization Models
Deterministic
Policy Evaluation Models
Decision Making
Under Uncertainty Models
Stochastic
Policy Optimization Models
Stochastic
Policy Evaluation Models
Uses Of
Integrated Assessment Models
Deterministic Models
Deterministic
Policy Optimization Models
Deterministic
Policy Evaluation Models
- Compute Optimal Carbon Taxes,
- Insure Consistency in Assumptions
Control Rates, etc.
-Calculate Costs of Meeting Emission/
Concentration/Climate/Impact Targets
- Assess Interactions and Feedbacks
-Identify Critical Gaps in Research
-Project Specific Impacts
Decision Making
Under Uncertainty Models
Stochastic
Policy Optimization Models
Stochastic
Policy Evaluation Models
-Assess Optimal Policies
- Compute Probabilities of
Under Uncertainty
-Compute Value of
Information/Research
Cost/Benefits of Climate Policies
- Compute Probabilities of
Meeting Targets
Some Approaches to
the Integration of Costs & Benefits
• Do Informally Through Careful Choice of Target
and Then Minimize Costs to Achieve
• Iterate Between Tolerable Windows and
Optimization Approaches
• Formal Cost/Benefit Analysis
Deterministic Policy Optimization Models:
Balancing the Costs of Controlling Carbon Emissions
Against the Costs of Climate Impacts Over Time
Carbon
Emissions
Optimal With
No Impacts
2000
Time
Incremental Optimal
Value/Cost With
Impacts
Optimal
Optimal With
With
No Impacts
Impacts
2100
2000
2100
Time
Simple Example of Uncertainty
in Policy Optimization Models
Case
Climate
Sensitivity
(Per CO2
Doubling)
Damage
Function
(Per 2 Degrees
C Increase)
90% Prob.
2.5 Degrees C
2% of GDP
10% Prob.
4.8 Degrees C
15% of GDP
Hedging Against Bad Climate Outcomes
Global Carbon Emissions (GtC)
25
20
Reference
90% Probability Scenario
10% Probability Scenario
Hedge/90% Scenario
Hedge/10% Scenario
15
10
5
0
2000
2010
2020
2030
2040
2050
Year
2060
2070
2080
2090
2100
Hedging Against Bad Climate Outcomes
Carbon Tax ($2000/metric ton)
1200
1000
800
Reference
90% Probability Scenario
10% Probability Scenario
Hedge/90% Scenario
Hedge/10% Scenario
600
400
200
0
2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100
Year
The Global Sustainability Perspective
Alternative
Development Pathways
Development
Equity, Sustainability
Finance, Technology,
Livelihoods
Environmental &
Socio-Economic
Impacts
Adaptation,
Vulnerability
Costs
co-benefits
Mitigation
Emissions
Climate
Policy
Sustainable
Development
Policy
Vision,
Lifestyles
Game Theory Formulations
• Look at Incentives for Countries to Take Action on
Their Own or in Coalitions
• Can Be Either Formulated Either Deterministically
or Under Uncertainty
• May Lead to Over-Estimating Rationality and
Propensity of Nations to Act Only in Their Own Self
Interest
Key IA Issues
• How to Integrate:
– Method for Integrating
– How to Value Impacts
– How to Represent Technologies/Tech. Change
•
•
•
•
How Much to Aggregate/Disaggregate
How to Factor in Equity and Sustainability
How to Communicate All This to the DMs
How to Communicate All this to the Public