Global Emissions

• J. R. Birge and C. H. Rosa, "Incorporating Investment Uncertainty into Greenhouse Policy Models," Technical Report 95-2, Department of Industrial and Operations Engineering, University of Michigan, 1995.

  Abstract

  Greenhouse gas policy decisions require comprehensive undertanding of atmospheric, economic, and social impacts. Many studies have considered the effects of atmospheric uncertainty in global warming, but economic uncertainties have received much less analysis. We consider a key component of economic uncertainty: the return on investments in new technologies. Using a mathematical programming model, we show that ignoring uncertainty in technology investment policy may lead to decreases as great as 2\% in overall expected economic activity in the U.S. with even higher losses in possible future scenarios. These results indicate that both federal and private technology investment policies should be based on models explicitly incorporating uncertainty.