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.
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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number
12868.
Length: Date of creation: 08 Feb 2008 Date of revision: Publication status: Published in American Journal of Agricultural Economics, February 2008, Vol. 90, No. 1, pp. 249-255. Handle: RePEc:isu:genres:12868
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