Cost-Risk Analysis Reconsidered—Value of Information on the Climate Sensitivity in the Integrated Assessment Model PRICE

dc.contributor.authorKhabbazan, Mohammad M.
dc.date.accessioned2022-07-11T12:09:09Z
dc.date.available2022-07-11T12:09:09Z
dc.date.issued2022-06-02
dc.date.updated2022-07-08T09:50:58Z
dc.description.abstractInfeasible solutions or negative expected values of future climate information are undesired problems if climate policies are adopted under Cost-Effectiveness Analysis (CEA) to reach uncertain temperature targets. Cost-Risk Analysis (CRA) was developed to resolve these issues. It allows for a trade-off between expected welfare losses of mitigation and avoided risk of transgressing a climate target with a certain probability of compliance (Safety). Some of the significant contributions of this paper are: (i) It updates the Probabilistic Integrated model of Climate and the Economy (PRICE) as a probabilistic version of the latest version of the Dynamic Integrated Climate-Economy model (DICE) 2016, and it extends the model to run welfare-maximizing decision analytic frameworks readily. (ii) It highlights that the standard method of applying CRA (Old CRA) leads to an extra welfare cost. (iii) It proposes revised instruction on how to use CRA. (iv) It simulates and compares welfare-maximizing decision analytic frameworks on the level of risk, damages, and carbon prices. (v) It measures the value of information using risk-based methods and compares them with the value of information calculated using the damage-based method. (vi) It measures the carbon prices for the CRA scenarios for the first time. The results show that the choice of the disutility function governs the magnitude of the value of information. Using a damage function or Old CRA, the value of information is significantly high for new information arriving between 2020 and 2060. If the New CRA is applied, however, such benefits are negligible.en
dc.description.sponsorshipDFG, 414044773, Open Access Publizieren 2021 - 2022 / Technische Universität Berlinen
dc.identifier.eissn1996-1073
dc.identifier.urihttps://depositonce.tu-berlin.de/handle/11303/17216
dc.identifier.urihttp://dx.doi.org/10.14279/depositonce-15995
dc.language.isoenen
dc.rightsLicensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https://creativecommons.org/licenses/by/4.0/).
dc.rights.urihttps://creativecommons.org/licenses/by/4.0/en
dc.subject.ddc300 Sozialwissenschaftende
dc.subject.otherclimate economicsen
dc.subject.otherclimate policyen
dc.subject.otherclimate targeten
dc.subject.othercost-risk analysisen
dc.subject.otherintegrated assessmenten
dc.subject.otheroptimal policyen
dc.subject.otheruncertaintyen
dc.subject.othervalue of informationen
dc.titleCost-Risk Analysis Reconsidered—Value of Information on the Climate Sensitivity in the Integrated Assessment Model PRICEen
dc.typeArticleen
dc.type.versionpublishedVersionen
dcterms.bibliographicCitation.articlenumber4096en
dcterms.bibliographicCitation.doi10.3390/en15114096en
dcterms.bibliographicCitation.issue11en
dcterms.bibliographicCitation.journaltitleEnergiesen
dcterms.bibliographicCitation.originalpublishernameMDPIen
dcterms.bibliographicCitation.originalpublisherplaceBaselen
dcterms.bibliographicCitation.volume15en
tub.accessrights.dnbfreeen
tub.affiliationFak. 7 Wirtschaft und Management>Inst. Volkswirtschaftslehre und Wirtschaftsrecht (IVWR)>FG Wirtschafts- und Infrastrukturpolitik (WIP)de
tub.affiliation.facultyFak. 7 Wirtschaft und Managementde
tub.affiliation.groupFG Wirtschafts- und Infrastrukturpolitik (WIP)de
tub.affiliation.instituteInst. Volkswirtschaftslehre und Wirtschaftsrecht (IVWR)de
tub.publisher.universityorinstitutionTechnische Universität Berlinen
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