Abstract
A collapse of the West-Antarctic Ice Sheet (WAIS) would cause a sea level rise of 5–6 m, perhaps even within 100 years, with catastrophic consequences. The probability of such a collapse is small but increasing with the rise of the atmospheric concentrations of greenhouse gas and the resulting climate change. This paper investigates how the potential collapse of the WAIS affects the optimal rate of greenhouse gas emission control. We design a decision and learning tree in which decision are made about emission reduction at regular intervals: the decision makers (who act as social planners) have to decide whether to implement the environmental or not (keeping then the flexibility to act later). By investing in the environmental policy, they determine optimally the date of the optimal emission reduction. At the same time, they receive new information on the probability of a WAIS collapse and the severity of its impacts. The probability of a WAIS collapse is endogenous and contingent on greenhouse gas concentrations. We solve this optimisation problem by backward induction. We find that a potential WAIS collapse substantially bring the date of the optimal emission reduction forward and increases its amount if the probability is high enough (a probability of 1% per year for the worst case), if the impacts are high enough (a worst case damage of 10% of GDP for a 3˚C warming) or if the decision maker is risk averse enough (for example a social damage due to pollution equal to 1% GDP for an atmospheric temperature of 3˚C). We also find that, as soon as a WAIS collapse is a foregone fact, emission reduction falls to free up resource to prepare for adapting to the inevitable. By contrast, adaptation (such as building dikes along the coast) postpones policy intervention because that strategy reduces the risk of catastrophic damages.
Article PDF
Similar content being viewed by others
Avoid common mistakes on your manuscript.
References
Alley RB, Marotzke J, Nordhaus WD, Overpeck JT, Peteet DM, Pielke RA, Pierrehumbert RT, Rhines PB, Stocker TF, Talley LD, Wallace JM (2003) Abrupt climate change. Science 299(5615):2005–2010
Arrow KJ, Fischer AC (1974) Environmental preservation, uncertainty and irreversibility. Q J Econ 88:312–319
Baranzini A, Chesney M, Morisset J (2003) The impact of possible climate catastrophes on global warming policy. Energy Policy 31:691–701
De Angelis H, Skarca P (2003) Glacier surge after ice shelf collapse. Science 299(5612):1560–1562
Dixit AK, Pindyck RS (1994) Investment under uncertainty. Princeton University Press, Princeton
Fisher AC, Narain U (2003) Global warming, endogenous risk, and irreversibility. Environ Resour Econ 25(7):395–416
Gjerde J, Grepperud S, Kverndokk S (1999) Optimal climate policy under the possibility of a catastrophe. Resour Energy Econ 21:289–317
Harvey D, Huang Z (1995) Evaluation of the potential impact of methane clathrate destabilization on future global warming. J Geophys Res 100:2905–2926
Henry C (1974) Investment decisions under uncertainty: the irreversibility effect. Am Econ Rev 64:1006–1012
IPCC (2001) Climate change 2001: the scientific basis: summary for policy-makers—a report of Working Group 1 on the Intergovernmental Panel on Climate Change
Keller K, Bolker BM, Bradford DF (2004) Uncertain climate thresholds and optimal economic growth. J Environ Econ Manage 48:723–741
Kolstad CD (1996) Learning and stocks effects in environmental regulation: the case of greenhouse gas emissions. J Environ Econ Manage 31:1–18
Lonsdale KG, Downing TE, Nicholls RJ, Parker D, Vafeidis AT, Dawson R, Hall J (2008) Plausible responses to the threat of rapid sea-level rise for the Thames Estuary. Clim Change. doi:10.1007/s10584-008-9483-0
Nordhaus WD (1994) Managing the global commons: the economics of climate change. MIT, Cambridge, MA
Nordhaus WD, Boyer J (2000) Warming the world: economic models of global warming. MIT, Cambridge, MA
Olsthoorn AA, van der Werff PE, Bouwer LM, Huitema D (2008) Neo-Atlantis: the Netherlands under a five meter sea level rise. Clim Change. doi:10.1007/s10584-008-9423-z
Oppenheimer M (1998) Global warming and the stability of the West Antarctic ice sheet. Nature 393:322–325
Pindyck RS (2000) Irreversibilities and the timing of environmental policy. Resour Energy Econ 22:233–259
Pindyck RS (2002) Optimal timing problems in environmental economics. J Econ Dyn Control 26:1677–1697
Poumadère M, Mays C, Pfeifle G, Vafeidis AT (2008) Worst case scenario as stakeholder decision support: a 5–6 meter sea level rise in the Rhone delta, France. Clim Change. doi:10.1007/s10584-008-9446-5
Saphores J-D (2004) Environmental uncertainty and the timing of environmental policy. Natural Resource Modeling 17(2):163–190
Schimmelpfennig D (1995) The option value of renewable energy—the case of climate change. Energy Econ 17(7):311–317
Smith JB, Schellnhuber H-J, Mirza MMQ, Fankhauser S, Leemans R, Lin E, Ogallo L, Pittock B, Richels RG, Rosenzweig C, Tol RSJ, Weyant JP, Yohe GW (2001) Vulnerability to climate change and reasons for concern: a synthesis, Chapter 19. In: McCarthy JJ, Canziani OF, Leary NA, Dokken DJ, White KS (eds) Climate change 2001: impacts, adaptation, and vulnerability. Cambridge University Press, Cambridge, pp 913–967
Tol RSJ (2002a) Estimates of the damage costs of climate change. Part I: benchmark estimates. Environ Resour Econ 21:47–73
Tol RSJ (2002b) Estimates of the damage costs of climate change. Part II: dynamic estimates. Environ Resour Econ 21:135–160
Tol RSJ (2008) An emission intensity protocol for climate change: an application of FUND. Climate Policy 4:269–287
Tsur Y, Zemel A (1996) Accounting for global warming risks: resource management under event uncertainty. J Econ Dyn Control 20(6–7):1289–1305
Werey C (2000) Politiques de renouvellement des réseaux d’eau potable. PhD thesis, Strasbourg University
Wright EL, Erickson JD (2003) Incorporating catastrophes into integrated assessment: science, impacts, and adaptation. Clim Change 57:265–286
Yin R, Newman DH (1996) The effect of catastrophic risk on forest investment decisions. J Environ Econ Manage 31:186–197
Author information
Authors and Affiliations
Corresponding author
Additional information
This work was conducted while M.-L. Guillerminet was with the Research unit Sustainability and Global Change, Hamburg University.
The algorithm is available upon request and can be sent by the authors.
Rights and permissions
Open Access This is an open access article distributed under the terms of the Creative Commons Attribution Noncommercial License (https://creativecommons.org/licenses/by-nc/2.0), which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.
About this article
Cite this article
Guillerminet, ML., Tol, R.S.J. Decision making under catastrophic risk and learning: the case of the possible collapse of the West Antarctic Ice Sheet. Climatic Change 91, 193–209 (2008). https://doi.org/10.1007/s10584-008-9447-4
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10584-008-9447-4