Essays on environmental policy under catastrophic event uncertainty.

Summary This thesis is devoted to the study of the implications of uncertainty on environmental policy. The debate around uncertainty has intensified in the context of climate change and sustainability. Many recent studies examining environmental policy have shown how uncertainty can alter economic behavior. This thesis contributes to this growing literature on uncertainty and environmental policy. To this end, Chapter 2 aims to present a new explanation for poverty traps through the presence of disaster probability. I present a new trade-off between adaptation and mitigation policies other than the usual dynamic trade-off highlighted in many studies. Many recent reports from international institutions have begun to highlight the importance of building a market economy through R&D innovations that manage adaptation and mitigation investments. Chapter 3 builds a Schumpeterian growth model in which investors manage adaptation and mitigation investments. Chapter 4 focuses on individual preferences and sustainability. This chapter aims to show that the sustainability criterion may not be consistent with optimal decisions in an economic model with a possibility of catastrophe when there are limit cycles (Hopf bifucation). Therefore, the criterion should be revised by policy makers to include the possibility of limit cycles.