Group for Research in Decision Analysis

Stochastic Control Paradigms Applied to Climate Change Models

Alain Haurie Director and co-founder, ORDECSYS, Switzerland

We show how a discrete event stochastic control paradigm similar to the one proposed in the realm of finance, economic planning or manufacturing systems can be used to analyze the important issue of optimal timing in global climate change policies. One proposes a stochastic economic growth model to study the optimal schedule of greenhouse gases (GHG) emissions abatement in an economy that can invest in RD&D, in an existing or a future backstop technology, or in adaptation capital and faces uncertainty in both climate and technical progress dynamics.