Research Publication

November 2019 | Working Paper

New Paper Revision: Pricing Uncertainty Induced by Climate Change

Michael Barnett, William Brock, and Lars Peter Hansen

Geophysicists examine and document the repercussions for the earth’s climate induced by alternative emission scenarios and model specifications. Using simplified approximations, they produce tractable characterizations of the associated uncertainty. Meanwhile, economists write simplified damage functions to assess uncertain feedbacks from climate change back to the economic opportunities for the macroeconomy. How can we assess both climate and emissions impacts, as well as uncertainty in the broadest sense, in social decision-making? We provide a framework for answering this question by embracing recent decision theory and tools from asset pricing, and we apply this structure with its interacting components in a revealing quantitative illustration.

Journal: forthcoming in the Review of Financial Studies |Tags: Climate, Risk, Robustness and Ambiguity, Uncertainty and Valuation|Export BibTeX >

@article{BarnettBrockHansen:2020,

Author = {Michael Barnett and William Brock and Lars Peter Hansen},

Date-Added = {2019-11-08 10:47:02 -0600},

Date-Modified = {2019-11-08 10:49:54 -0600},

Journal = {Review of Financial Studies},

Title = {Pricing Uncertainty Induced by Climate Change},

Year = {2020, forthcoming in the Review of Financial Studies}}