IDEAS home Printed from https://ideas.repec.org/a/bla/jpbect/v15y2013i2p273-291.html
   My bibliography  Save this article

Double Irreversibility and Environmental Policy Timing

Author

Listed:
  • AUDE POMMERET
  • FABIEN PRIEUR

Abstract

The timing of environmental policy typically takes place within a framework in which uncertainty over the future impact of pollution and two different kinds of irreversibilities interact. The first kind of irreversibility concerns the sunk cost of environmental degradation; the second is related to the sunk cost of environmental policy. Clearly, the two irreversibilities pull in opposite directions: policy irreversibility leads to more pollution and a less/later policy, while environmental irreversibility generates less pollution and a more/sooner policy. Using a real option approach and an infinite time horizon model, this paper considers both irreversibilities simultaneously. The model first is developed by paying particular attention to the option values related to pollution and policy adoption. The environmental policy we consider consists in increasing the natural assimilation rate. Solving the model in closed form then provides solutions for both the optimal pollution level and the optimal environmental policy timing. Finally, we provide a numerical example with the purpose of appraising which irreversibility has the prevailing effect and what is the overall impact of both irreversibilities on pollution and policy timing.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Aude Pommeret & Fabien Prieur, 2013. "Double Irreversibility and Environmental Policy Timing," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 15(2), pages 273-291, April.
  • Handle: RePEc:bla:jpbect:v:15:y:2013:i:2:p:273-291
    DOI: jpet.12018
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/jpet.12018
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Giorgio Ferrari & Torben Koch, 2019. "On a strategic model of pollution control," Annals of Operations Research, Springer, vol. 275(2), pages 297-319, April.
    2. Ferrari, Giorgio & Koch, Torben, 2018. "On a Strategic Model of Pollution Control," Center for Mathematical Economics Working Papers 586, Center for Mathematical Economics, Bielefeld University.
    3. Alberto Ansuategi & Simone Marsiglio, 2017. "Is Environmental Protection Beneficial for the Environment?," Review of Development Economics, Wiley Blackwell, vol. 21(3), pages 786-802, August.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jpbect:v:15:y:2013:i:2:p:273-291. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley Content Delivery). General contact details of provider: http://edirc.repec.org/data/apettea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.