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

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  • LOFGREN Asa
  • MILLOCK Katrin
  • NAUGES Céline

    (LERNA, TSE)

Abstract

We propose a method for estimating hurdle rates for firms’ investments in pollution abatement technology, using ex post data. The method is based on a structural option value model where the future price of polluting fuel is the major source of uncertainty facing the firm. The econometric procedure is illustrated using a panel of firms from the Swedish pulp and paper industry, and the energy and heating sector from 2000 to 2003. The results indicate a hurdle rate of investment of almost 3 in the pulp and paper industry and almost 4 in the energy and heating sector.

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Bibliographic Info

Paper provided by LERNA, University of Toulouse in its series LERNA Working Papers with number 07.06.227.

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Date of creation: Aug 2007
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Handle: RePEc:ler:wpaper:07.06.227

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Cited by:
  1. Hammar, Henrik & Löfgren, Åsa, 2007. "Explaining adoption of end of pipe solutions and clean technologies," Working Paper 102, National Institute of Economic Research.

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