Cost-effective management of a eutrophicated sea in the presence of uncertain technological development and climate change
We analyse effects of uncertain climate change and technological development on cost-effective abatement of nitrogen and phosphorus for a eutrophied sea. A dynamic model is developed which accounts for differences in the sea’s adjustment to the loads of the two nutrients, uncertainty in climate change effects with probabilistic constraints on nutrient pool targets, and uncertain technological development in a mean-variance framework. The analytical results show that introduction of uncertainty increases abatement costs but that the effect on marginal abatement cost differ for the two types of uncertainty. Marginal abatement cost is increased by technological uncertainty but decreased by the reduction in the risk discount of climate change uncertainties. It is also shown that abatement along the optimal time path is delayed by the introduction of technological uncertainty, but made earlier when considering climate change uncertainty. An application to the eutrophied Baltic Sea indicates that climate change and technological development can reduce total abatement cost by 1/3, but also increase it considerably when uncertainty is included.
|Date of creation:||21 Jan 2014|
|Contact details of provider:|| Postal: Department of Economics, Box 7013, Swedish University of Agricultural Sciences, SE-750 07 Uppsala, Sweden|
Phone: 018-67 1724
Fax: 018-67 3502
Web page: http://www.slu.se/ekonomi
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:hhs:slueko:2014_001. 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: (Elizabeth Hillerius)
If references are entirely missing, you can add them using this form.