Robust simulatoin of environmental policies using the DICE model

Research output: Chapters, Conference Papers, Creative and Literary Works (RGC: 12, 32, 41, 45)32_Refereed conference paper (with ISBN/ISSN)Not applicablepeer-review

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Author(s)

Detail(s)

Original languageEnglish
Title of host publicationProceedings - Winter Simulation Conference
Pages1295-1305
StatePublished - 2010
Externally publishedYes

Publication series

Name
ISSN (Print)0891-7736

Conference

Title2010 43rd Winter Simulation Conference, WSC'10
PlaceUnited States
CityBaltimore, MD
Period5 - 8 December 2010

Abstract

Integrated assessment models that combine geophysics and economics features are often used to evaluate environmental economic policies. In these models, there are often profound uncertainties and Monte Carlo simulations are often used to evaluate the policies. Generally, the simulation approach requires that the distribution of the uncertain parameters are clearly specified. In this paper, we adopt the widely used multivariate normal distribution to model the uncertain parameters. However, we assume that the mean vector and covariance matrix of the distribution are within some ambiguity sets. We propose a change-of-measure technique to derive the simulation results for any mean vector and covariance matrix in the sets without actually simulating them. We then show how to find the worst case performance for all mean vectors and covariance matrices in the ambiguity sets by solving a sequence of convex problems. This performance provides a robust evaluation of the policies. We test our algorithm on a famous environmental economic model, known as the DICE model, and obtain some insightful and interesting results. ©2010 IEEE.

Citation Format(s)

Robust simulatoin of environmental policies using the DICE model. / Hu, Zhaolin; Cao, Jing; Hong, L. Jeff.

Proceedings - Winter Simulation Conference. 2010. p. 1295-1305 5679061.

Research output: Chapters, Conference Papers, Creative and Literary Works (RGC: 12, 32, 41, 45)32_Refereed conference paper (with ISBN/ISSN)Not applicablepeer-review