Search

The transformation of economies towards net zero greenhouse gas (GHG) emissions within very few decades will require substantial investments. However, the transition to a low-carbon economy exhibits a high degree of complexity and path dependency. Consequently, firms and investors systematically face deep uncertainty, a situation with no information about the probabilities of possible outcomes, where even the possible outcomes are not known. In this article, we present concepts and classifications of un-certainty and discuss potential sources of deep uncertainty for firms and investors, such as uncertainty about technology development and innovation, the behaviour of competitors, or climate-related policy development. Standard modelling-based decision support tools typically used by firms and investors are of limited value under deep un-certainty. Thus, deep uncertainty deters decision-making and delays low-carbon in-vestment. This article addresses this issue by providing an overview of approaches for decision-making under deep uncertainty. We analyse their applicability for firms and investors and discuss what challenges they might face. Based on this analysis, we de-rive guidelines for policymakers to reduce deep uncertainty and support firms' decision-making under deep uncertainty.

Without the participation of the United States, for many years the worlds largest emitter of greenhouse gases, mitigation of global climate change seems hardly conceivable. Despite the US rejection of the Kyoto Protocol and the reluctance of the Bush administration to engage in postKyoto negotiations, recent developments suggest that the US position towards climate policy might change in the medium run. This study provides an overview on current trends in US climate policy. We outline the main elements of national climate policy proposals and statelevel initiatives. Based on this overview, recent trends in US climate policy are related to the European approach to combat climate change. Furthermore, we elaborate on the aspects that may be important for Europe to design its own domestic and international climate policy in order to achieve the longterm global goal of stabilizing greenhouse gas concentrations. While it seems likely that the US will take a leading role in international climate policy, it can also be expected to challenge the European position in many respects rather than to simply support any Kyototype process. Copyright © 2008 John Wiley & Sons, Ltd and ERP Environment.

Reimplementation of an EU-wide emissions trading system by means of National Allocation Plans is at the core of the European environmental policy agenda. EUMember States must allocate their national emission budgets under the EU Burden Sharing Agreement between energy-intensive sectors that are eligible for European emissions trading and the remaining segments of their economies that will be subject to complementary domestic emission regulation. We show that such hybrid emission regulation may lead to substantial excess costs compared to a comprehensive emissions trading system covering all segments of the economy. Furthermore, the hybrid system associated with the current design of National Allocation Plans is likely to discriminate against sectors that are not part of the emissions trading scheme. The interested reader can make use of a web-based interactive simulation model in order to specify and evaluate alternative settings of the EU emissions trading system.