Using Ex Post Data to Estimate the Hurdle Rate of Abatement Investments – An Application to the Swedish Pulp and Paper Industry and Energy Sector

Katrin Millock (), Celine Nauges and Åsa Löfgren ()
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Katrin Millock: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique
Åsa Löfgren: Department of Economics, Göteborg University - GU - Göteborgs Universitet = University of Gothenburg

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Abstract: We propose a method for estimating hurdlerates for firms' investments in pollution abatement technology, using expost data. The method is based on a structural option value model where thefuture price of polluting fuel is the major source of uncertainty facing thefirm. The econometric procedure is illustrated using a panel of firms fromthe Swedish pulp and paper industry, and the energy and heating sector from2000 to 2003. The results indicate a hurdle rate of investment of almost 3in the pulp and paper industry and almost 4 in the energy and heating sector.

Keywords: option value; fuel price uncertainty; carbon emissions abatement; price uncertainty; panel data (search for similar items in EconPapers)
Date: 2007
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00272041v1
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Published in 2007

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Related works:
Working Paper: Using Ex Post Data to Estimate the Hurdle Rate of Abatement Investments – An Application to the Swedish Pulp and Paper Industry and Energy Sector (2007)
Working Paper: Using Ex Post Data to Estimate the Hurdle Rate of Abatement Investments - An Application to the Swedish Pulp and Paper Industry and Energy Sector (2007)
Working Paper: Using Ex Post Data to Estimate the Hurdle Rate of Abatement Investments - An application to the Swedish Pulp and Paper Industry and Energy Sector (2007)
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