Incomplete model specification in a multi-pollutants setting: The case of climate change and acidification

This paper analyses the consequences of incomplete environmental model specification on policy design in a multi-pollutants framework. Focusing on the correlations between aerosols and greenhouse gases, the paper compares abatement and stock targets setting for various cases of incomplete model specification. Both cases of lax and stringent regulation, compared to what is socially optimum, may arise. Furthermore, the lax/stringent nature of the policies may evolve over time, so that the time horizon of policy design matters in assessing the impact of incomplete model specification.

Research highlights▶ We model various types of interaction between greenhouse gases and aerosols. ▶ We examine the impact of the regulator using incomplete models of these interactions to design stock or abatement targets. ▶ Both cases of lax and stringent incomplete management arise as compared to the socially optimal case. ▶ The time horizon is crucial to assess the incomplete policies.