IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Quasi-option value and climate policy choices

Author Info

  • Ha-Duong, Minh

Abstract

In the climate change issue, the environmental irreversibility (risk of an acceleration of mitigation policies if the worse happen) has to be balanced with the investment irreversibility (risk of over-cautious policies). To explore this balance, we define an option value for a precautionary climate policy. Using the simplest decision-making model, we expose how option value relates to the expected value of future information. Using quantitative data from an integrated as sessment model, we find that most of the times the environmental irreversibility dominates the investment irreversibility. For all cases explored here, the order of magnitude of the option value was significant, about 50% of the opportunity cost.

(This abstract was borrowed from another version of this item.)

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/B6V7G-3VB9DM5-8/2/243da94058fe6e8b00dd9b12ddd2e181
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 20 (1998)
Issue (Month): 5-6 (December)
Pages: 599-620

as
in new window

Handle: RePEc:eee:eneeco:v:20:y:1998:i:5-6:p:599-620
Contact details of provider: Web page: http://www.elsevier.com/locate/eneco

Keywords:

Other versions of this item:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Henry, Claude, 1974. "Investment Decisions Under Uncertainty: The "Irreversibility Effect."," American Economic Review, American Economic Association, vol. 64(6), pages 1006-12, December.
  2. Hourcade, Jean-Charles & Salles, Jean-Michel & Thery, Daniel, 1992. "Ecological economics and scientific controversies. Lessons from some recent policy making in the EEC," Ecological Economics, Elsevier, vol. 6(3), pages 211-233, December.
  3. Fisher, Anthony C. & Hanemann, W. Michael, 1987. "Quasi-option value: Some misconceptions dispelled," Journal of Environmental Economics and Management, Elsevier, vol. 14(2), pages 183-190, June.
  4. Minh Ha-Duong & Michael Grubb & Jean-Charles Hourcade, 1997. "Influence of socioeconomic inertia and uncertainty on optimal CO2-emission abatement," Post-Print halshs-00002452, HAL.
  5. Arrow, Kenneth J & Fisher, Anthony C, 1974. "Environmental Preservation, Uncertainty, and Irreversibility," The Quarterly Journal of Economics, MIT Press, vol. 88(2), pages 312-19, May.
  6. Peck, Stephen C. & Teisberg, Thomas J., 1993. "Global warming uncertainties and the value of information: an analysis using CETA," Resource and Energy Economics, Elsevier, vol. 15(1), pages 71-97, March.
  7. Ulph, Alistair & Ulph, David, 1997. "Global Warming, Irreversibility and Learning," Economic Journal, Royal Economic Society, vol. 107(442), pages 636-50, May.
  8. Kolstad, Charles D., 1994. "George Bush versus Al Gore : Irreversibilities in greenhouse gas accumulation and emission control investment," Energy Policy, Elsevier, vol. 22(9), pages 771-778, September.
  9. Fisher, Anthony C & Hanemann, W Michael, 1990. "Option Value: Theory and Measurement," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 17(2), pages 167-80.
Full references (including those not matched with items on IDEAS)

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

as in new window


Cited by:

  1. Baptiste Perrissin Fabert & Etienne Espagne & Antonin Pottier & Patrice Dumas, 2014. "The Comparative Impact of Integrated Assessment Models' Structures on Optimal Mitigation Policies," Working Papers 2014.58, Fondazione Eni Enrico Mattei.
  2. Minh Ha-Duong & Benoit Morel, 2003. "The real option with an absorbing barrier," Post-Print halshs-00003976, HAL.
  3. repec:hal:wpaper:hal-00866414 is not listed on IDEAS
  4. LANGE Andreas & TREICH Nicolas, 2007. "Uncertainty, Learning and Ambiguity in Economic Models on Climate Policy: Some Classical Results and New Directions," LERNA Working Papers 07.16.237, LERNA, University of Toulouse.
  5. Donaghy, Peter & Rolfe, John & Bennett, Jeffrey W., 2004. "Quasi-option values for enhanced information regarding genetically modified foods," 2004 Conference (48th), February 11-13, 2004, Melbourne, Australia 58403, Australian Agricultural and Resource Economics Society.
  6. Sonja Peterson, 2004. "The Contribution of Economics to the Analysis of Climate Change and Uncertainty: A Survey of Approaches and Findings," Kiel Working Papers 1212, Kiel Institute for the World Economy.
  7. Olivier Godard, 2007. "Climat et générations futures - Un examen critique du débat académique suscité par le Rapport Stern," Working Papers hal-00243059, HAL.
  8. Etienne Espagne & Baptiste Perrissin Fabert & Antonin Pottier & Franck Nadaud & Patrice Dumas, 2012. "Disentangling the Stern/Nordhaus Controversy: Beyond the Discounting Clash," Working Papers 2012.61, Fondazione Eni Enrico Mattei.
  9. Keller, Klaus & Bolker, Benjamin M. & Bradford, D.F.David F., 2004. "Uncertain climate thresholds and optimal economic growth," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 723-741, July.
  10. Hallegatte, Stephane & Shah, Ankur & Lempert, Robert & Brown, Casey & Gill, Stuart, 2012. "Investment decision making under deep uncertainty -- application to climate change," Policy Research Working Paper Series 6193, The World Bank.
  11. Laurent Gilotte & Michel de Lara, 2005. "Precautionary Effect and Variations of the Value of Information," Working Papers 2005.28, Fondazione Eni Enrico Mattei.
  12. baptiste perrissin fabert & Etienne Espagne & Antonin Pottier & Franck Nadaus, 2012. "Disentangling the Stern/Nordhaus controversy. Why and how do beliefs and modelling choices matter?," EcoMod2012 4270, EcoMod.
  13. Patrice Dumas & Etienne Espagne & Baptiste Perrissin-Fabert & Antonin Pottier, 2012. "Comprehensive Description of RESPONSE," CIRED Working Papers hal-00866414, HAL.
  14. Hourcade, Jean-Charles & Salles, Jean-Michel & Thery, Daniel, 1992. "Ecological economics and scientific controversies. Lessons from some recent policy making in the EEC," Ecological Economics, Elsevier, vol. 6(3), pages 211-233, December.
  15. Strand, Jon & Miller, Sebastian & Siddiqui, Sauleh, 2011. "Infrastructure investments under uncertainty with the possibility of retrofit : theory and simulations," Policy Research Working Paper Series 5516, The World Bank.
  16. Peterson, Sonja, 2006. "Uncertainty and economic analysis of climate change : a survey of approaches and findings," Open Access Publications from Kiel Institute for the World Economy 3778, Kiel Institute for the World Economy (IfW).
  17. W. Botzen & Jeroen Bergh, 2014. "Specifications of Social Welfare in Economic Studies of Climate Policy: Overview of Criteria and Related Policy Insights," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 58(1), pages 1-33, May.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Access and download statistics

When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:20:y:1998:i:5-6:p:599-620. 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: (Zhang, Lei)

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.