REGULATING ENVIRONMENTAL THREATS

Yacov Tsur and Amos Zemel

No 7150, Discussion Papers from Hebrew University of Jerusalem, Department of Agricultural Economics and Management

Abstract: Environmental consequences of natural resource exploitation often entail threats of future occurrences of detrimental abrupt events rather than (or in addition to) inflicting a damage gradually. The possibility of abrupt occurrence of climate-change related calamities is a case in mind. The uncertainty associated with the realization of these threats and their public-bad nature complicate the determination of optimal economic response. We analyze the regulation of such environmental threats by means of a Pigouvian hazard tax, based on the shadow cost of the hazard-generating activities. A numerical example illustrates possible effects of the proposed regulation scheme.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 29
Date: 2006
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Citations: View citations in EconPapers (3)

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Journal Article: Regulating environmental threats (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:huaedp:7150

DOI: 10.22004/ag.econ.7150

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