Chapter 3: Uncertainty in economic models of optimal energy use
by Hans W. Gottinger
International Journal of Environment and Pollution (IJEP), Vol. 17, No. 5/6, 2002

Abstract: In the economics of non-renewable resources, the problem of eating the cake when its size is unknown constitutes an essential feature of uncertainty. Such a model was proposed by Gilbert (1979) and he obtained results that were both illuminating and suggestive. The problem of consuming an exhaustible resource when there is ignorance about its size is analytically equivalent to the more recent problem of CO₂, that is generating fossil fuel emissions when the critical CO₂ budget (where irreversibly the damage becomes infinite) is uncertain. It is also interesting to note that activities that reduce uncertainty, such as exploration in the former problem, correspond to the use of research in the latter. We will convert Gilbert’s model to the new problem context and show, in a social planning framework, that the treatment of uncertainty has significant impacts on policy choices regarding global CO₂ emission limits. We will support such conclusions by a numerical treatment of an optimal control model on fossil fuel use where uncertainty is a major subject of sensitivity analysis.

Online publication date: Mon, 14-Jul-2003

The full text of this article is only available to individual subscribers or to users at subscribing institutions.

 
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Environment and Pollution (IJEP):
Login with your Inderscience username and password:

Username:        Password:          Forgotten your password?

Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

If you still need assistance, please email subs@inderscience.com