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Using Ex Post Data to Estimate the Hurdle Rate of Abatement Investments – An Application to the Swedish Pulp and Paper Industry and Energy Sector

  • Katrin Millock

    ()

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Céline Nauges

    ()

    (LERNA - Economie des Ressources Naturelles - UT1 - Université Toulouse 1 Capitole - INRA - Institut National de la Recherche Agronomique - CEA - Commissariat à l'énergie atomique et aux énergies alternatives)

  • Åsa Löfgren

    ()

    (Department of Economics, Göteborg University - University of Göteborg)

We propose a method for estimating hurdlerates for firms' investments in pollution abatement technology, using expost data. The method is based on a structural option value model where thefuture price of polluting fuel is the major source of uncertainty facing thefirm. The econometric procedure is illustrated using a panel of firms fromthe Swedish pulp and paper industry, and the energy and heating sector from2000 to 2003. The results indicate a hurdle rate of investment of almost 3in the pulp and paper industry and almost 4 in the energy and heating sector.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00272041.

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Date of creation: 2007
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Publication status: Published in Göteborg University, School of Business, Economics and Law, Working Paper in Economics 249. 2007
Handle: RePEc:hal:cesptp:halshs-00272041
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00272041
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