Abstract

In this talk the optimal policy for using an allocated carbon emission budget over time is investigated, with the objective to maximize profit under additional considerations of sustainability aspects. Under diffusion assumptions of the underlying budget process, we formulate and solve the associated stochastic control problems, explicitly look into the effects of present-biased preferences of decision-makers, and consider a constraint on ratcheting-down of consumption. In particular, we use and extend stochastic control techniques developed for optimal dividend strategies in insurance risk theory for the present purpose. The approach also enables to study the effects and efficiency of carbon taxation to steer emission patterns towards a certain target.

The coordinators of the ASMF seminar series are Servaas van Bilsen and Felix Liebrich.