Optimal geoengineering experiments

Lassi Ahlvik and Antti Iho

Journal of Environmental Economics and Management, 2018, vol. 92, issue C, 148-168

Abstract: We characterize optimal investment in pollution control measures with uncertain effects that can be learned by experimentation. The anticipation of learning through experimentation introduces two effects. The Inquisitive Effect appears because the planner wants to invest in geoengineering to gather socially valuable information on its effects. This effect encourages investments in geoengineering and may justify field tests even where the expected benefits fall short of the costs. The Flexibility Effect stems from the planner optimally preparing for the post-learning stage, where the field test is either ramped up or scaled down, depending on the outcome of the experiment. This effect can encourage or discourage investments in geoengineering. We demonstrate this set-up through an economic analysis of an artificial oxygenation scheme designed to mitigate eutrophication in the Baltic Sea and find that while the expected marginal benefit falls short of costs, a field test representing some 10 percent of full deployment would be optimal.

Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0095069617300232
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:92:y:2018:i:c:p:148-168

DOI: 10.1016/j.jeem.2018.08.008

Access Statistics for this article

Journal of Environmental Economics and Management is currently edited by M.A. Cole, A. Lange, D.J. Phaneuf, D. Popp, M.J. Roberts, M.D. Smith, C. Timmins, Q. Weninger and A.J. Yates

More articles in Journal of Environmental Economics and Management from Elsevier
Bibliographic data for series maintained by Catherine Liu ().