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Least-Cost Tradeable Risk Permit Scheme for Controlling Risk of Introducing Invasive Alien Species by Shipping

Author

Listed:
  • Feng, Hongli
  • Hennessy, David A.

Abstract

The probability of alienspecies invasion is reasonably characterized by a weakest link technology. A tradeableriskpermit system for shippers has been proposed as a means of efficiently reducing this invasion probability. Economic jointness arising from statistical independence among private risks for the weakest link technology implies that the risk instrument to be traded should be linear in the log of firm success probabilities, rather than linear in firm success probabilities.

Suggested Citation

  • Feng, Hongli & Hennessy, David A., 2012. "Least-Cost Tradeable Risk Permit Scheme for Controlling Risk of Introducing Invasive Alien Species by Shipping," Staff General Research Papers Archive 35017, Iowa State University, Department of Economics.
  • Handle: RePEc:isu:genres:35017
    as

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    File URL: http://www2.econ.iastate.edu/papers/p15017-2012-03-29.pdf
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    References listed on IDEAS

    as
    1. Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
    2. Pimentel, David & Zuniga, Rodolfo & Morrison, Doug, 2005. "Update on the environmental and economic costs associated with alien-invasive species in the United States," Ecological Economics, Elsevier, vol. 52(3), pages 273-288, February.
    3. Horan, Richard D. & Lupi, Frank, 2005. "Economic Incentives for Controlling Trade-Related Biological Invasions in the Great Lakes," Agricultural and Resource Economics Review, Cambridge University Press, vol. 34(01), pages 75-89, April.
    4. Horan, Richard D. & Lupi, Frank, 2005. "Tradeable risk permits to prevent future introductions of invasive alien species into the Great Lakes," Ecological Economics, Elsevier, vol. 52(3), pages 289-304, February.
    5. Jones, Kristin Roti & Corona, Joel P., 2008. "An ambient tax approach to invasive species," Ecological Economics, Elsevier, vol. 64(3), pages 534-541, January.
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    More about this item

    Keywords

    biological control; independence; linearize; permit trading; risk abatement; uniformly mixed pollutant; weakest link;

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water

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