Regulating Environmental Threats
Environmental consequences of natural resource exploitation often entail threats of future occurrences of detrimental abrupt events rather than (or in addition to) inflicting a damage gradually. The possibility of abrupt occurrence of climate-change related calamities is a case in mind. The uncertainty associated with the realization of these threats and their public-bad nature complicate the determination of optimal economic response. We analyze the regulation of such environmental threats by means of a Pigouvian hazard tax, based on the shadow cost of the hazard-generating activities. A numerical example illustrates possible effects of the proposed regulation scheme.
|Date of creation:||2006|
|Contact details of provider:|| Postal: Faculty of Agriculture, Food and Environmental Quality Sciences Hebrew University of Jerusalem, P.O. Box 12, Rehovot 76100|
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