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An Approximate Dynamic Programming Framework for Modeling Global Climate Policy under Decision-Dependent Uncertainty

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dc.contributor.author Webster, Mort
dc.contributor.author Santen, Nidhi
dc.contributor.author Parpas, Panos
dc.date.accessioned 2011-10-17T16:36:44Z
dc.date.available 2011-10-17T16:36:44Z
dc.date.issued 2011-09
dc.identifier.other 2011-018
dc.identifier.uri http://hdl.handle.net/1721.1/66292
dc.description.abstract Analyses of global climate policy as a sequential decision under uncertainty have been severely restricted by dimensionality and computational burdens. Therefore, they have limited the number of decision stages, discrete actions, or number and type of uncertainties considered. In particular, other formulations have difficulty modeling endogenous or decision-dependent uncertainties, in which the shock at time t+1 depends on the decision made at time t. In this paper, we present a stochastic dynamic programming formulation of the Dynamic Integrated Model of Climate and the Economy (DICE), and the application of approximate dynamic programming techniques to numerically solve for the optimal policy under uncertain and decision-dependent technological change. We compare numerical results using two alternative value function approximation approaches, one parametric and one non-parametric. Using the framework of dynamic programming, we show that an additional benefit to near-term emissions reductions comes from a probabilistic lowering of the costs of emissions reductions in future stages, which increases the optimal level of near-term actions. en_US
dc.description.sponsorship U.S. National Science Foundation grant num- ber 0825915 and the U.S. Department of Energy grant number DE-SC0003906 en_US
dc.language.iso en_US en_US
dc.publisher MIT Center for Energy and Environmental Policy Research en_US
dc.relation.ispartofseries MIT-CEEPR;2011-018
dc.rights An error occurred on the license name. en
dc.rights.uri An error occurred getting the license - uri. en
dc.title An Approximate Dynamic Programming Framework for Modeling Global Climate Policy under Decision-Dependent Uncertainty en_US
dc.type Working Paper en_US


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