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Adaptive management of energy transitions in long-term climate change

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Scheffran, J. (2008). Adaptive management of energy transitions in long-term climate change. Computational Management Science, 5(3), 259-286. doi:10.1007/s10287-007-0044-1.

Cite as: http://hdl.handle.net/11858/00-001M-0000-0018-3186-2
The UN Framework Convention on Climate Change (UNFCCC) demands stabilization of atmospheric greenhouse gas concentrations at levels that prevent dangerous anthropogenic interference with the climate system. This requires an unprecedented degree of international action for emission reductions and technological change in the energy sector. Extending the established optimal control approach, the paper combines the concepts of adaptive control, inverse modeling and local optimization to climate change decision making and management. An alternative decision model is described where controls are adjusted towards a moving target under changing conditions. A framework for integrated assessment is introduced, where a basic climate model is coupled to an economic production function with energy as a production factor, which is controlled by the allocation of investments to alternative energy technologies. Investment strategies are shaped by value functions, including utility, costs and climate damages for a given future time horizon, which are translated into admissible emission limits to keep atmospheric carbon concentrations and global mean temperature asymptotically below a given threshold. Conditions for switching between management and technology paths with different costs and carbon intensities are identified. To take account of the substantial uncertainties, an exemplary case discusses the sensitivity of the results to variation of crucial parameters, in particular time discounting, climate damage, taxes and time horizon for decision-making.