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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

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  • LOFGREN Asa
  • MILLOCK Katrin
  • NAUGES Céline

    (LERNA, TSE)

Abstract

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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  • LOFGREN Asa & MILLOCK Katrin & NAUGES Céline, 2007. "Using Ex Post Data to Estimate the Hurdle Rate of Abatement Investments - An application to the Swedish Pulp and Paper Industry and Energy Sector," LERNA Working Papers 07.06.227, LERNA, University of Toulouse.
    • Handle: RePEc:ler:wpaper:07.06.227
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    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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