Non-cooperative Climate Policy under Uncertainty

Do unilateral investments in mitigation efforts pay off when countries are risk averse? Should Europe follow a preventive adaptation strategy? The research project “Non-cooperative Climate Policy under Uncertainty” funded by the German Federal Ministry of Education and Research (BMBF) tried to answer these and similar questions.
Within 3.5 years Prof. Marcel Thum (Chair of Public Economics, TU Dresden) and his team investigated the influence of risk and uncertainty on global climate policy. The focus lied on the strategic interaction of mitigation and adaptation measures. The research team at TU Dresden was supported by Prof. Gaute Torsvik (University of Bergen, NOR) and Prof. Kai A. Konrad (MPI, Munich).

Goals

The economic impact of climate change is highly uncertain. Still, economic research on climate policy has widely neglected the risk dimension in climate policy. Mitigation policies can be seen as instruments to insure against the risks of climate change. As unilateral mitigation efforts are largely crowded out by the actions of other countries, the mitigation strategy may not be very effective. Instead, an active adaptation policy might be the more promising strategy.

Innovation

So far, the economic framework of climate policy decisions has ignored the uncertainty about climate change impacts as well as the risk averse behavior of decision makers. Including the risk dimension allows to analyze important new aspects of climate policy.

Schedule

The project ran from 09-2011 until 03-2015 and was structured in 3 parts. First, a, theoretical framework was developed that allows a detailed analysis of climate policy decisions under uncertainty. In the second part, we extended the theoretical analysis by a simulation model. In part three we took a closer look at decision making on global climate policies. Typically, decisions on climate policy are not made by a single politician but rather by large teams in a government and previous research has shown that the number of participants is decisive for the outcome of political decision making processes. We applied an experimental analysis of the standard public good game with teams as decision makers to answer this question.

Benefits

The project results contribute substantially to the better understanding of global climate policy, esp. with respect to strategic aspects of climate policy and risk dependency of climate policy decisions.

Publications

Konrad, K. A. and M. Thum: Climate Policy Negotiations with Incomplete Information, Economica 81, 2014, 244-256.
Auerswald, H.: Nichtkooperative Klimapolitik, Unsicherheit und Teamentscheidungen, Dissertation, TU Dresden, 03/2015.
Konrad, K. A. and M. Thum: The Role of Economic Policy in Climate Change Adaptation CESifo Economic Studies 60(1), 2014, 32-61.
Konrad, K. A. and M. Thum: Does a Clean Development Mechanism Facilitate International Environmental Agreements? Working Paper of the Max Planck Institute for Tax Law and Public Finance No. 2014-20, 2014.
Konrad, K. A. and M. Thum: What is the Role of Governments in Climate Change Adaptation? OUPblog, 7/2014.
Konrad, K. A. and M. Thum: What is the role of governments in climate change adaptation?, OUPblog, 7/2014.
Auerswald, H., C. Schmidt, M. Thum and G. Torsvik: Teams Punish Less, CESifo Working Paper 4406, 2013.
Auerswald, H.: Strategic Climate Policy and Risk-Taking - A Simulation Analysis, mimeo, 2013.
Auerswald, H.: Intergenerational Externalities and Climate Policy, mimeo, 2012.
Auerswald, H., K.A. Konrad and M. Thum: Adaptation, Mitigation and Global Risk-Taking, CESifo Working Paper No. 3320, 2011.
Auerswald, H., K.A. Konrad and M. Thum: Unsichere Klimafolgen und rationale Klimapolitik, ifo Schnelldienst, 18/2011, 40-42.
Auerswald, H., K.A. Konrad and M. Thum: Unsichere Klimafolgen und rationale Klimapolitik, www.oekonomenstimme.org, 08.06.2011.
L. P. Feld, K. A. Konrad and M. Thum: Umdenken in der Klimapolitik nach Cancún!, oekonomenstimme.org, 2011.
L. P. Feld, K. A. Konrad and M. Thum: Umdenken in der Klimapolitik nach dem Gipfel von Cancún!, ifo Schnelldienst 5, 2011.

Contact

Prof. Dr. Marcel Thum
TU Dresden
Faculty of Business and Economics
Chair of Public Economics
D- 01062 Dresden

Phone:+49-(0)351-463 35453
Fax: +49-(0)351-463 37052

The project "Non-cooperative Climate Policy under Uncertainty" is funded by the German Federal Ministry of Education and Research (BMBF); funding code 01LA1106A. The author is responsible for this content.