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Global Warming: When to Bite the Bullet

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  • Jon M. Conrad
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    Abstract

    An option-value (or stopping-rule) model is developed to determine the optimal timing and expected value of policies (bullets) to slow global warming. The model and policies are calibrated to reflect current estimates or predictions of temperature drift, variance, damage, and the cost of slowing global warming. The "basic" and "asymptotic" bullets have option values of between $600 and $700 billion dollars for a discount rate of 5 percent. The most effective (platinum) bullet is not adopted until mean global temperature reaches a trigger value of 15.54°C, which is not likely to be reached during the next two decades.

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    Bibliographic Info

    Article provided by University of Wisconsin Press in its journal Land Economics.

    Volume (Year): 73 (1997)
    Issue (Month): 2 ()
    Pages: 164-173

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    Handle: RePEc:uwp:landec:v:73:y:1997:i:2:p:164-173

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    Web page: http://le.uwpress.org/

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    Cited by:
    1. Mason, Charles F., 2001. "Nonrenewable Resources with Switching Costs," Journal of Environmental Economics and Management, Elsevier, vol. 42(1), pages 65-81, July.
    2. Conrad, Jon M. & Lopez, Andres, 2000. "Stochastic Water Quality: The Timing and Option Value of Treatment," Working Papers, Cornell University, Department of Applied Economics and Management 127675, Cornell University, Department of Applied Economics and Management.
    3. Elettra Agliardi & Luigi Sereno, 2011. "Environmental Protection, Public Finance Requirements and the Timing of Emission Reductions," Working Paper Series, The Rimini Centre for Economic Analysis 53_11, The Rimini Centre for Economic Analysis.
    4. E. Agliardi & L. Sereno, 2012. "On the optimal timing of switching from non-renewable to renewable resources: dirty vs clean energy sources and the relative efficiency of generators," Working Papers, Dipartimento Scienze Economiche, Universita' di Bologna wp855, Dipartimento Scienze Economiche, Universita' di Bologna.
    5. Baudry, Marc, 1999. "Stock externalities and the diffusion of less polluting capital: an option approach," Structural Change and Economic Dynamics, Elsevier, Elsevier, vol. 10(3-4), pages 395-420, December.
    6. Sims, Charles & Finnoff, David, 2012. "The role of spatial scale in the timing of uncertain environmental policy," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 36(3), pages 369-382.
    7. Conrad, Jon M., 2000. "Wilderness: options to preserve, extract, or develop," Resource and Energy Economics, Elsevier, Elsevier, vol. 22(3), pages 205-219, July.

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