Pollution thresholds under uncertainty

Franz Wirl

Environment and Development Economics, 2006, vol. 11, issue 04, pages 493-506

Abstract: This study investigates the optimal use of dirty technologies for economic development and when to stop polluting (either temporarily or forever). This question is addressed within a real option framework where three different kinds of options arise: for stopping pollution temporarily or forever and for re-starting. The possibility to shelve a polluting technology temporarily allows for a more conservationist policy. Costs associated with the option of a re-start lead to hystereses effects that complicate empirical cross-country comparisons of environmental policies.

Date: 2006

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Persistent link: http://EconPapers.repec.org/RePEc:cup:endeec:v:11:y:2006:i:04:p:493-506_00

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