Over the last few decades, integrated assessment models (IAM) have provided insight into the relationship between climate change, economy, and climate policies. The limitations of these models in capturing uncertainty in climate parameters, heterogeneity in damages and policies, have given rise...

Global warming, alterations of ecosystems, and sunk investments all imply irreversible changes with uncertain future costs and benefits. The Arrow–Fisher–Hanemann–Henry quasi-option value and the Dixit–Pindyck option value both measure how irreversibility and uncertainty change the value...

The uncertainty of future economic development affects the term structure of discount rates and, thus, the intertemporal weights that are to be used in cost benefit analysis. The U.K. and France have recently adopted a falling term structure to incorporate uncertainty and the U.S. is considering...

The integrated assessment literature frequently replicates uncertainty by averaging Monte Carlo runs of deterministic models. This Monte Carlo analysis is, in essence, an averaged sensitivity analyses. The approach resolves all uncertainty before the first time period, drawing parameters from a...