When Should Uncertain Nonpoint Emissions Be Penalized in a Trading Program?

David Hennessy and Hongli Feng

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: When nonpoint source pollution is stochastic and the damage function is convex, intuition might suggest it is more important to control a nonpoint pollution source than a point source. Earlier research has provided sufficient conditions such that the permit price for a unit of ex-ante expected emissions should be higher than the permit price for a unit of certain emissions. Herein we provide a set of necessary and sufficient conditions such that this is the case. An approach to testing for the validity of the condition set is available, and has been applied to a related problem.

Date: 2008-02-08
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Published in American Journal of Agricultural Economics, February 2008, vol. 90 no. 1, pp. 249-255

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Journal Article: When Should Uncertain Nonpoint Emissions Be Penalized in a Trading Program? (2008)
Working Paper: When Should Uncertain Nonpoint Emissions be Penalized in a Trading Program? (2007)
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