Dynamic Optimisation in the Presence of Threshold Effects when the Location of the Threshold is Uncertain With an Application to a Possible Disintegration of the Western Antarctic Ice Sheet.

The purpose of this paper is to derive necessary conditions for the optimal control in the presence of threshold effects when the threshold is a curve in n-dimensional space of uncertain location. The usefulness of these conditions is shown by examining the optimal regulation of two greenhouse gases when there is a risk that the combined radiative forcing from these two gases may lead to the catastrophic event that the Western Antarctic Ice Sheet disintegrates.Optimal Control, Catastrophic Risk, Climate Change

Catastrophes and expected marginal utility: How the value of the last fish in a lake is infinity and why we shouldn't care (much)

Catastrophic risk is currently a hotly debated topic. This paper contributes to this debate by showing two results. First it shown that the value function in dynamic optimization can have an infinite derivative at some point even if the model specification has functional forms that are finite and without infinite derivatives. In the process it is shown that standard phase diagrams used in optimal control theory contain more information than generally recognized. Second we show that even if the value function has an infinite derivative at some point, it is not correct that this point should be avoided in finite time at almost any cost. The results are illustrated in a simple linear-quadratic fisheries model, but proven for a more general class of growth functions

Genetic Variability and Collective Social Norms: The Case of Binge Drinking

This paper explores how collective social norms can have individual-level genetic foundation. Our study is the first we know to report a plausible link between genetically founded individual preferences in a fraction of a population and social norms governing behavior of all individuals. As our motivating example, we focus on patterns of Excessive Drinking in Social Situations (EDSS) across Europe that are possibly triggered by genetically caused variations in personality. The genetic trait is shyness, which correlates with eye color. We present empirical results indicating that alcohol consumption in social situations correlate with eye color and a model which suggests that conditions exist in which EDSS can emerge as a strategy in a larger fraction of the population than is genetically predisposed to EDSS. In addition, our model shows that alcohol taxes may be counter-productive in controlling the emergence of EDSS as a social norm.Excessive Drinking in Social Situations (EDSS); drinking behavior; genetically founded individual preferences; sosial norms

Resource depletion and capital accumulation under catastrophic risk: Policy actions against stochastic thresholds and stock pollution

An intertemporal optimal strategy for accumulation of reversible capital and management of an exhaustible resource is analyzed for a global economy when resource depletion generates discharges that add to a stock pollutant that affects the likelihood for hitting a tipping point or threshold of unknown location, causing a randomdisembodied technical regress. We characterize an optimal strategy by imposing the notion precautionary tax on current extraction for preventing a productivity shock driven by stock pollution and a capital subsidy to promote capital accumulation so as to build up a buffer for future consumption opportunities should the threshold be hit. The precautionary tax will internalize the expected welfare loss should a threshold be hit, whereas the capital subsidy will internalize the expected post-catastrophic long-run return from current capital accumulation

Climate change, catastrophic risk and the relative unimportance of discounting

Discounting in the presence of catastrophic risk is a hotly debated issue, in particular with respect to climate change. Many scientists and laymen concerned with potentially catastrophic impacts feel that if an increase in the discount rate drastically increases the likelihood of catastrophic outcomes, this discredits economic cost-benefit calculations. This paper argues that this intuition is sound and that if cost-benefit calculations are done within a model that encompasses the type of catastrophic risk that these scientists worry about, the resulting stabilization target will only be slightly influenced by the discount rate. This is shown within a stylized model of a risk neutral decision maker facing a problem with a catastrophic threshold with unknown location

Resource depletion and capital accumulation under catastrophic risk: The role of stochastic thresholds and stock pollution

An intertemporal optimal strategy for accumulation of reversible capital and management of an exhaustible resource is analyzed for a global economy when resource depletion generates discharges that add to a stock pollutant that affects the likelihood for hitting a tipping point or threshold of unknown location, causing a random disembodied technical regress. We characterize the optimal strategy by imposing the notion precautionary tax on current extraction. Such a tax will internalize future expected damages or expected welfare loss should a threshold be hit. With reversible capital the presence of a stochastic threshold should speed up accumulation as long as no threshold is hit so as to build up a buffer or stock for future consumption should a threshold be hit

The Trade-off between Intra- and Intergenerational Equity in Climate Policy

This paper focuses on two equity dimensions of climate policy, intra- and intergenerational equity, and analyzes the implications of equity preferences on climate policy, and on the production and consumption patterns in rich and poor countries. We develop a dynamic two-region model, in which each region suffers from local pollution and global warming, but also has an inequality aversion over current consumption allocations. Inequality aversion lifts the consumption path of the poor region, while the rich region must take a greater share of the climate burden. Furthermore, with inequality aversion, the optimal climate policy leads to higher investment in clean capital in the North and in dirty capital in the South, thereby allowing the South to pollute more and develop faster. The optimal policy may even require the poor region to increase emissions relative to the uncoordinated business-as-usual case. Introducing transfers between the regions reinforces these effects. However, loans to poor countries to reduce inequality may result in a debt crisis, and hence, debt remittance may be part of the optimal climate policy

Maternal investment, sibling competition, and offspring survival with increasing litter size and parity in pigs (Sus scrofa)

The aim of this study was to examine the effects of litter size and parity on sibling competition, piglet survival, and weight gain. It was predicted that competition for teats would increase with increasing litter size, resulting in a higher mortality due to maternal infanticide (i.e., crushing) and starvation, thus keeping the number of surviving piglets constant. We predicted negative effects on weight gain with increasing litter size. Based on maternal investment theory, we also predicted that piglet mortality would be higher for litters born late in a sow's life and thus that the number of surviving piglets would be higher in early litters. As predicted, piglet mortality increased with increasing litter size both due to an increased proportion of crushed piglets, where most of them failed in the teat competition, and due to starvation caused by increased sibling competition, resulting in a constant number of survivors. Piglet weight at day 1 and growth until weaning also declined with increasing litter size. Sows in parity four had higher piglet mortality due to starvation, but the number of surviving piglets was not affected by parity. In conclusion, piglet mortality caused by maternal crushing of piglets, many of which had no teat success, and starvation caused by sibling competition, increased with increasing litter size for most sow parities. The constant number of surviving piglets at the time of weaning suggests that 10 to 11 piglets could be close to the upper limit that the domestic sow is capable of taking care of

Policies for electrification of cars in the short and long run

acceptedVersio

Policies for electrification of the car fleet in the short and long run – subsidizing electric vehicles or subsidizing charging stations?

Abatement can be performed by measures that have an impact on present emissions, but no lasting effect, and by long-lived infrastructure investments. We study the optimal combination of short and long-lived options for reducing greenhouse gas (GHG) emissions, by specifying abatement cost functions depending on abatement from these two options. Electrification of the transport sector is used as an example. A transition from internal combustion engines vehicles (ICEVs) to electric vehicles (EVs) can be incentivized by both subsidies on purchases of EVs and increased density of fast chargers. Subsidizing the purchase of EVs only leads to emissions reductions in the next few years (static option), whereas investment in infrastructure also will reduce abatement costs in several years to come (dynamic option). We find that the present marginal abatement cost of the dynamic alternative exceeds the costs of static abatement in optimum, thus the dynamic option may be profitable even if it is more expensive. A higher expected abatement cost in later periods most likely makes it even more profitable to use the dynamic policy instrument. This framework is used for a numerical study on electrification of the transport sector in Norway. The numerical simulations confirm the results of the theory model. Flexibility in the domestic target over time and the presence of an international permit market affect the combination of static and dynamic abatement. This stresses the importance of early and time consistent plans for international regulations of GHG emissions.This paper is funded by the Norwegian Research Council through the Electrans project, which is part of the ENERGIX program, and PLATON - PLATform for Open and Nationally accessible climate policy knowledge