Country-Level Emissions Abatement Decisions - A Dynamic Programming Approach

Master's Thesis from the year 2016 in the subject Economy - Environment economics, grade: 1,7, Technical University of Munich, course: Finance & Information Management, language: English, abstract: The impact of global warming on the global economy has been widely discussed in literature offering a broad variety of estimates. Some papers have examined global impacts of climate change, whereas some studies have focused on regional or local consequences. Taking into account various different publications, the first part of this master's thesis proposes individual functions at a country level that illustrate the impact of global warming. These functions are further used to simulate the countries' behaviour over time using dynamic programming. We provide an analysis of the interaction between the abatement costs, the ecological impact caused by a certain temperature increase and the abatement efforts made by the countries. A detailed analysis of their behaviour including the formation of coalitions rounds out the first part of the thesis. The second part considers recent proposals from the academic and political world. The 21st session of the Conference of Parties (COP21) in December 2015 was described as a fundamental breakthrough in climate negotiations by many commentators. However, several issues such as the establishment of binding quotas for the Parties being linked to the 2C global mitigation target remain unsolved. We simulate the efforts of the Parties to reduce their emissions based on individual abatement targets. To the best of our knowledge, our approach is the first one to analyze the behaviour of countries in a climate change context using dynamic programming. All components of the Matlab program providing the results are flexible and can be changed according to the assumptions.