Alternative Types of Ambiguity and their Effects on Climate Change Regulation

Phoebe Koundouri; Nikitas Pittis; Panagiotis Samartzis; Nikolaos Englezos; Andreas Papandreou

doi:10.12688/openreseurope.14300.1

Alternative Types of Ambiguity and their Effects on Climate Change Regulation

Open Res Eur. 2022 Jan 21:2:9. doi: 10.12688/openreseurope.14300.1. eCollection 2022.

Authors

Phoebe Koundouri¹, Nikitas Pittis², Panagiotis Samartzis², Nikolaos Englezos², Andreas Papandreou³

Affiliations

¹ School of Economics, Athens University of Economics and Business, Athens, Greece.
² Banking and Financial Management, University of Piraeus, Piraeus, Greece.
³ School of Economics, National and Kapodistrian University of Athens, Athens, Greece.

Abstract

This paper focuses on different types of ambiguity that affect climate change regulation. In particular, we analyze the effects of the interaction among three types of agents, namely, the decision-maker (DM), the climate change experts, and the society, on the probabilistic properties of green-house gas (GHG) emissions and the formation of environmental policy. These effects are analyzed under two types of ambiguity: "deferential ambiguity" and "preferential ambiguity". Deferential ambiguity refers to the uncertainty that the experts face concerning whose forecast (scenario) the DM will defer to. Preferential ambiguity stems from the potential inability of the DM to correctly discern the society's preferences about the desired change of GHG emissions. This paper shows that the existence of deferential and preferential ambiguities have significant effects on GHG emissions regulation.

Keywords: ambiguity; climate change regualtion; deep uncertainty; deferential ambiguity; preferential ambiguity; tail risks of environmental-policy variables.

Grants and funding

This project has received funding from the European Research Council (ERC) under the European Union’s Horizon 2020 research and innovation programme (grant agreement No 951424) and fonr the European Union's Horizon 2020 research and innovation programme No 690268 (Use of a Decision-Analytic Framework to explore the water-energy-food NExus in complex and trans-boundary water resources systems of fast growing developing countries [DAFNE]).