Assessing contaminated land cleanup costs and strategies

Pauline Barrieu, Nadine Bellamy and Bernard Sinclair-Desgagné

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: The remediation of contaminated sites is often subject to substantial cost overruns. This persistent discrepancy between estimated and realized costs is chiefly responsible for misguided land use and wasteful delays in the reconversion of former industrial sites. In order to deal with incomplete information and uncertainty in this context, this paper draws on stochastic modeling and mathematical finance methods. We show that relatively simple and usable formulas can then be derived for better assessing cleanup strategies. These formulas apply to generic remediation technologies and scenarios. They are robust to misspecification of key parameters (like the effectiveness of a prescribed treatment). They also yield practical rules for decision making and budget provisioning.

Keywords: contaminated sites; brownfields; remediation management; regulatory cost; estimates; hitting-time models; real-options theory (search for similar items in EconPapers)
JEL-codes: F3 G3 Q15 (search for similar items in EconPapers)
Date: 2017-02-01
New Economics Papers: this item is included in nep-ore
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Published in Applied Mathematical Modelling, 1, February, 2017, 42, pp. 478-492. ISSN: 0307-904X

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http://eprints.lse.ac.uk/68198/ Open access version. (application/pdf)

Related works:
Working Paper: Assessing contaminated land cleanup costs and strategies (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:68198

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