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Cost-Effective and Stochastic Dominance Approaches to Stochastic Pollution Control

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  • Richard Horan

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Abstract

Most economic studies of pollution externalities focus on the relative efficiency or cost-effectiveness of alternative pollution control instruments. Much less attention has been paid to policy goals and objectives. However, a comprehensive pollution control strategy depends on all of these choices. This paper examines several efficiency properties of cost-effective pollution control strategies in a stochastic setting when economic damages from pollution are unknown. A number of policy goals are considered. In this setting and under a primal approach, it is found that certain stochastic dominance conditions must be satisfied for the strategies to exhibit desirable efficiency properties. A dual approach to cost-effective pollution control, which is based on a stochastic dominance objective, is also considered. Copyright Kluwer Academic Publishers 2001

Suggested Citation

  • Richard Horan, 2001. "Cost-Effective and Stochastic Dominance Approaches to Stochastic Pollution Control," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 18(4), pages 373-389, April.
  • Handle: RePEc:kap:enreec:v:18:y:2001:i:4:p:373-389
    DOI: 10.1023/A:1011113726358
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    References listed on IDEAS

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    1. James Shortle & David Abler & Richard Horan, 1998. "Research Issues in Nonpoint Pollution Control," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 11(3), pages 571-585, April.
    2. Beavis, Brian & Walker, Martin, 1983. "Achieving environmental standards with stochastic discharges," Journal of Environmental Economics and Management, Elsevier, vol. 10(2), pages 103-111, June.
    3. Shortle, James S., 1987. "Allocative Implications Of Comparisons Between The Marginal Costs Of Point And Nonpoint Source Pollution Abatement," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 16(1), April.
    4. Segerson, Kathleen, 1988. "Uncertainty and incentives for nonpoint pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 15(1), pages 87-98, March.
    5. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249, March.
    6. Hadar, Josef & Russell, William R, 1969. "Rules for Ordering Uncertain Prospects," American Economic Review, American Economic Association, vol. 59(1), pages 25-34, March.
    7. Beavis, Brian & Dobbs, Ian, 1987. "Firm behaviour under regulatory control of stochastic environmental wastes by probabilistic constraints," Journal of Environmental Economics and Management, Elsevier, vol. 14(2), pages 112-127, June.
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    Cited by:

    1. Horan, Richard D. & Shortle, James S. & Abler, David G. & Ribaudo, Marc, 2001. "The Design And Comparative Economic Performance Of Alternative Second-Best Point/Nonpoint Trading Markets," Staff Papers 11595, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    2. Wirl, Franz & Noll, Juergen, 2007. "Voluntary (environmental) standards," Journal of Economics and Business, Elsevier, vol. 59(4), pages 275-285.
    3. Franz Wirl & Juergen Noll, 2008. "Abatement and Permits when Pollution is Uncertain and Violations are Fined," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 40(2), pages 299-312, June.
    4. Horan, Richard D. & Lupi, Frank, 2003. "Tradable Risk Permits To Prevent Future Introductions Of Alien Invasive Species Into The Great Lakes," 2003 Annual meeting, July 27-30, Montreal, Canada 22111, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Elofsson, Katarina & Folmer, Henk & Gren, Ing-Marie, 2003. "Management of eutrophicated coastal ecosystems: a synopsis of the literature with emphasis on theory and methodology," Ecological Economics, Elsevier, vol. 47(1), pages 1-11, November.
    6. Elofsson, Katarina, 2002. "Economics of Marine Pollution," Department of Economics publications 78, Swedish University of Agricultural Sciences, Department of Economics.

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