Competing stochastic thresholds: The green transition as a race between “the good” and “the ugly”

Competing stochastic thresholds: The green transition as a race between “the good” and “the ugly” | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Competing stochastic thresholds: The green transition as a race between “the good” and “the ugly” Linnea Lorentzen, Steinar Strøm, Jon Vislie This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-4491007/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract We study a highly aggregated fossil-based world economy with two competing stochastic thresholds or tipping points. Current production generates emissions that add to a stock of GHGs that affect the probability distribution of hitting a climate threshold with severe consequences (the “ugly” scenario). The fossil-intensive output is used either for current consumption or as R&D-investment in knowledge production, with the stock of knowledge affecting the probability distribution for hitting a “good” threshold or having a technological breakthrough (the “good” scenario) providing a clean emission-free substitute to fossil energy. We characterize an optimal strategy for allocating resources over time, given that no threshold has been hit, with the strategy or decision rules being continuously revised due to the induced changes in the derived probability distribution. To avoid the ugly scenario, while pushing for the good one, we find that the conditional expected marginal benefit or willingness-to-pay for knowledge will be increasing over time, with a non-decreasing rate of R&D investment and a non-increasing rate of consumption. Implementation of this strategy requires a global organization with coercive power, equipped with instruments so as to tax the negative stock externality and to subsidize the provision of the public good or stock of knowledge. An important task for the global planner is continuously to update the hazard rates for hitting the two thresholds. JEL Classification C02, H23, H41, Q54, Q55 Competing stochastic thresholds climate change technological innovation global implementation Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-4491007","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":309393943,"identity":"699ca67d-9b1d-44fe-b332-94762026ce31","order_by":0,"name":"Linnea Lorentzen","email":"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAABCUlEQVRIiWNgGAWjYBACPmYILQMX4YfSPLi0sDEjKzgAxJINhLSgmAnSYnCAgMPY2HmPPfhQw8DDL3342OMPf2zyjI83P3xcwHBYhp+B9+ADrA7jSzeccYyBR7IvLd3gAE9asdmZY8bGMxgO80g28CUbYNXCYybNw8bAY3CGx0zigMThxG03ctikeYBagAaYSeDS8ucfSAv/N4kDBv8TN89/Q4QWxjawLWwSBxIOJG6Q4CGsRbK3T4JHsofNTOLMgeTEGWfSjI15DNJ5JJt5jLH5hZ//jJnEj282cvw8zM8kKv7YJfa3H374mKfC2p6fvccQW4hBAYYDQMYz41Y/CkbBKBgFowA/AABwu01ucB26OgAAAABJRU5ErkJggg==","orcid":"","institution":"Department of Economics, University of Oslo","correspondingAuthor":true,"prefix":"","firstName":"Linnea","middleName":"","lastName":"Lorentzen","suffix":""},{"id":309393944,"identity":"78e98c2c-0c96-4d55-81f6-652eaf37aac8","order_by":1,"name":"Steinar Strøm","email":"","orcid":"","institution":"Department of Economics, University of Oslo","correspondingAuthor":false,"prefix":"","firstName":"Steinar","middleName":"","lastName":"Strøm","suffix":""},{"id":309393945,"identity":"70fb5a14-c9ec-4f8e-8312-c557c2b35015","order_by":2,"name":"Jon Vislie","email":"","orcid":"","institution":"Department of Economics, University of Oslo","correspondingAuthor":false,"prefix":"","firstName":"Jon","middleName":"","lastName":"Vislie","suffix":""}],"badges":[],"createdAt":"2024-05-28 12:40:08","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-4491007/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-4491007/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":59334779,"identity":"f35fdf65-cadc-4713-a070-72f0bd9cdd46","added_by":"auto","created_at":"2024-06-29 21:18:55","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":444766,"visible":true,"origin":"","legend":"","description":"","filename":"Multithreshold34210524.pdf","url":"https://assets-eu.researchsquare.com/files/rs-4491007/v1_covered_c834072a-c160-4171-ab26-8bac9c569f0f.pdf"}],"financialInterests":"No competing interests reported.","formattedTitle":"Competing stochastic thresholds: The green transition as a race between “the good” and “the ugly”","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":false,"hideJournal":true,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"Competing stochastic thresholds, climate change, technological innovation, global implementation","lastPublishedDoi":"10.21203/rs.3.rs-4491007/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-4491007/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"\u003cp\u003eWe study a highly aggregated fossil-based world economy with two competing stochastic thresholds or tipping points. 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