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Individual Option Prices for Climate Change Mitigation

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  • Trudy Ann Cameron

    ()
    (Department of Economics, University of Oregon)

Abstract

Willingness to pay for climate change mitigation depends on people's perceptions about just how bad things will get if nothing is done. Individual subjective distributions for future climate conditions are combined with stated preference discrete choice data over alternative climate policies to estimate individual option prices (the appropriate ex ante welfare measure in the face of uncertainty) for climate change mitigation. We find significant scope effects in the estimated option prices according to both expected conditions and degree of uncertainty.

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File URL: http://economics.uoregon.edu/papers/UO-2003-9_Cameron_climate_classroom.pdf
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Bibliographic Info

Paper provided by University of Oregon Economics Department in its series University of Oregon Economics Department Working Papers with number 2003-9.

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Length: 42
Date of creation: 20 Jul 2002
Date of revision: 20 Jul 2002
Handle: RePEc:ore:uoecwp:2003-9

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Postal: 1285 University of Oregon, 435 PLC, Eugene, OR 97403-1285
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Fax: (541) 346-1243
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Web page: http://economics.uoregon.edu/
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Keywords: option prices; climate change; stated preferences; contingent valuation; state-dependent preferences;

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References

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  1. Viscusi, W Kip & O'Connor, Charles J, 1984. "Adaptive Responses to Chemical Labeling: Are Workers Bayesian Decision Makers?," American Economic Review, American Economic Association, vol. 74(5), pages 942-56, December.
  2. Cameron, Trudy Ann & Poe, Gregory L. & Ethier, Robert G. & Schulze, William D., 2002. "Alternative Non-market Value-Elicitation Methods: Are the Underlying Preferences the Same?," Journal of Environmental Economics and Management, Elsevier, vol. 44(3), pages 391-425, November.
  3. Machina, Mark J, 1987. "Choice under Uncertainty: Problems Solved and Unsolved," Journal of Economic Perspectives, American Economic Association, vol. 1(1), pages 121-54, Summer.
  4. David F. Layton & Gardner Brown, 2000. "Heterogeneous Preferences Regarding Global Climate Change," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 616-624, November.
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  6. Mendelsohn, Robert & Nordhaus, William D & Shaw, Daigee, 1994. "The Impact of Global Warming on Agriculture: A Ricardian Analysis," American Economic Review, American Economic Association, vol. 84(4), pages 753-71, September.
  7. Arrow, Kenneth J, 1982. "Risk Perception in Psychology and Economics," Economic Inquiry, Western Economic Association International, vol. 20(1), pages 1-9, January.
  8. Smith, V Kerry & Johnson, F Reed, 1988. "How Do Risk Perceptions Respond to Information? The Case of Radon," The Review of Economics and Statistics, MIT Press, vol. 70(1), pages 1-8, February.
  9. Smith, V Kerry & Desvousges, William H, 1987. "An Empirical Analysis of the Economic Value of Risk Changes," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 89-114, February.
  10. Cameron, Trudy Ann & Englin, Jeffrey, 1997. "Respondent Experience and Contingent Valuation of Environmental Goods," Journal of Environmental Economics and Management, Elsevier, vol. 33(3), pages 296-313, July.
  11. Viscusi, W. Kip, 1985. "A Bayesian perspective on biases in risk perception," Economics Letters, Elsevier, vol. 17(1-2), pages 59-62.
  12. Viscusi, W Kip & Magat, Wesley A, 1992. " Bayesian Decisions with Ambiguous Belief Aversion," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 371-87, October.
  13. Harrison, Glenn W. & Lesley, James C., 1996. "Must Contingent Valuation Surveys Cost So Much?," Journal of Environmental Economics and Management, Elsevier, vol. 31(1), pages 79-95, July.
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Cited by:
  1. Acquah, H. de-Graft & Onumah, Edward E., 2011. "Farmers Perception and Adaptation to Climate Change: An Estimation of Willingness to Pay," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 3(4), December.
  2. Klaus Glenk & Sergio Colombo, 2013. "Modelling outcome-related risk in choice experiments," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 57(4), pages 559-578, October.
  3. Fouquet, Roger, 2012. "The demand for environmental quality in driving transitions to low-polluting energy sources," Energy Policy, Elsevier, vol. 50(C), pages 138-149.
  4. Michael Scott & James Dirks & Katherine Cort, 2008. "The value of energy efficiency programs for US residential and commercial buildings in a warmer world," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 13(4), pages 307-339, May.
  5. Brian Roach, . "08-03 "Policies for Funding a Response to Climate Change"," GDAE Working Papers 08-03, GDAE, Tufts University.
  6. Sonia Akter & Jeff Bennett, 2011. "Household perceptions of climate change and preferences for mitigation action: the case of the Carbon Pollution Reduction Scheme in Australia," Climatic Change, Springer, vol. 109(3), pages 417-436, December.
  7. Riddel, Mary, 2011. "Uncertainty and measurement error in welfare models for risk changes," Journal of Environmental Economics and Management, Elsevier, vol. 61(3), pages 341-354, May.
  8. Trudy Cameron, 2005. "Updating Subjective Risks in the Presence of Conflicting Information: An Application to Climate Change," Journal of Risk and Uncertainty, Springer, vol. 30(1), pages 63-97, January.
  9. Nguyen, To N. & Shaw, W. Douglass & Woodward, Richard T. & Paterson, Robert & Boyle, Kevin, 2007. "An empirical study of option prices for hunting permits," Ecological Economics, Elsevier, vol. 63(2-3), pages 476-484, August.
  10. Roberts, David C. & Boyer, Tracy A. & Lusk, Jayson L., 2008. "Preferences for environmental quality under uncertainty," Ecological Economics, Elsevier, vol. 66(4), pages 584-593, July.
  11. Fredrik Carlsson & Mitesh Kataria & Alan Krupnick & Elina Lampi & Åsa Löfgren & Ping Qin & Susie Chun & Thomas Sterner, 2012. "Paying for Mitigation: A Multiple Country Study," Land Economics, University of Wisconsin Press, vol. 88(2), pages 326-340.
  12. Veronesi, Marcella & Schlondorn, Tim & Zabel, Astrid & Engel, Stefanie, 2012. "Designing REDD+ Schemes to Address Permanence Concerns: Empirical Evidence from Kenya," Congress Papers 124131, Italian Association of Agricultural and Applied Economics (AIEAA).
  13. Sonia Akter & Jeff Bennett & Michael B. Ward, 2013. "Climate change scepticism and public support for mitigation: evidence from an Australian choice experiment," Monash Economics Working Papers archive-47, Monash University, Department of Economics.
  14. Cerroni, Simone & Notaro, Sandra & Raffaelli, Roberta & Shaw, Douglass W., 2013. "The incorporation of subjective risks into choice experiments to test scenario adjustment," 2013 Second Congress, June 6-7, 2013, Parma, Italy 149894, Italian Association of Agricultural and Applied Economics (AIEAA).
  15. Carson, Richard T. & Louviere, Jordan J. & Wei, Edward, 2010. "Alternative Australian climate change plans: The public's views," Energy Policy, Elsevier, vol. 38(2), pages 902-911, February.
  16. Mary Riddel & W. Shaw, 2006. "A theoretically-consistent empirical model of non-expected utility: An application to nuclear-waste transport," Journal of Risk and Uncertainty, Springer, vol. 32(2), pages 131-150, March.

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