the impact of possible climate catastrophes on global warming policy abstract recent studies on global warming have introduced the inherent uncertainties associated with the costs and benefits of climate policies and have often shown that abatement policies are likely to be less aggressive or postponed in comparison to those resulting from traditional cost benefit analyses cba yet those studies have failed to include the possibility of sudden climate catastrophes the aim of this paper is to account simultaneously for possible continuous and discrete damages resulting from global warming and to analyse their implications on the optimal path of abatement policies our approach is related to the new literature on investment under uncertainty and relies on some recent developments of the real option in which we incorporated negative jumps climate catastrophes in the stochastic process corresponding to the net benefits associated with the abatement policies the impacts of continuous and discrete climatic risks can therefore be considered separately our numerical applications lead to two main conclusions i gradual continuous uncertainty in the global warming process is likely to delay the adoption of abatement policies as found in previous studies with respect to the standard cba however ii the possibility of climate catastrophes accelerates the implementation of these policies as their net discounted benefits increase significantly

option value empirical evidence from a case study of recreation and water quality a procedure for measuring option value and other preservation values of water quality is developed and applied to a case study area in the south platte river basin colorado benefits from water based recreation activities are the focus of the study the results provide an empirical test and confirmation of weisbrod s proposal that option value and other preservation values represent important social benefits and should be added to the aggregate consumer surplus of recreation activities to determine the total benefit of environmental amenities to society in the absence of such an estimate insufficient resources would be allocated by society to preservation of unique environments such as pristine mountain streams where mineral and energy development may irreversibly degrade water quality

land development and preservation over time and under uncertainty a review and a research agenda abstract the combination of a rising interest in sustainable natural resource use and the increasingly fractious nature of the interactions between developers and preservationists has led to renewed interest in the question of appropriate natural resource management in this paper i consider the question of land development and preservation over time and under uncertainty i first review the extant literature and then i discuss its shortcomings next i propose a research agenda which will enable us to shed light on some important management questions faced by land developers

entry its deterrence and its accommodation a study of the u s photographic film industry this work set in the new empirical industrial organization framework bresnahan 1987 examines firm level demand based and cost based explanations for entry and accommodation strategies in the u s photographic film industry i first estimate preentry and postentry market structures then using the estimated demand cost and market conduct parameters i show how entry by fuji photo or lack thereof by others is a function of two market structures i also show how market structure and conduct and changes in them over the pre and postentry periods are in turn functions of entry its deterrence and it accommodation

patterns of technological accumulation the comparative advantage and relative impact of asian emerging economies in low carbon energy technological systems abstract this paper highlights the specificities of the patterns of low carbon energy technological innovations in selected asian emerging economies china and the members of asean 4 thailand malaysia indonesia and the philippines are included in this analysis for their identical structure of developing economy we outline a synthetic framework to cluster together the technologies with similar characteristics and analyse the changes of these characteristics over time this is in order to elucidate the scope of sectoral composition and specialisation of the selected economies and thereby understand the relative impact of science based low carbon energy technologies on the niches of technological excellence the findings show that china was keen to pursue its diversification strategy and develop its capability in low carbon energy technologies since the turn of the millennium however china has been gradually losing its momentum in more traditional areas like biomass hydroelectric power natural gas and fossil fuels the asean 4 economies on the other hand are showing interest in building a number of niches of technological excellence this highlights a contrasting relative technological advantage between larger and smaller economies our findings also indicate that many of the low carbon technologies in selected economies have yet to attain strong scientific grounding for development the findings of this paper are expected to provide some insights into low carbon energy technological development of emerging economies and be useful for other developing economies to establish their strategic moves for energy technology development

testing for imperfect competition at the fulton fish market in this article i report the results of a study of the prices paid by individual buyers at the fulton fish market in new york city in principle this is a highly competitive market in which there should be no predictable price differences across customers who are equally costly to service the results indicate that different buyers pay different prices for fish of identical quality for example asian buyers pay 7 less for whiting than do white buyers a result which is inconsistent with the model of perfect competition

quasi option value some misconceptions dispelled abstract we discuss a couple of important issues in the recent literature on quasi option value we show that the assertion that quasi option value can be negative in a model with independent learning is based on confusion between quasi option value which is always positive and the net benefit of preservation of a natural environment subject to development which is not we also explore the significance of different assumptions about the nature of learning and show that the result that quasi option value is positive is surprisingly robust

the sign and size of option value we adapt the theoretical state preference model to value nonmarket public goods under individual uncertainty about use illustrating with an assessment of willingness to pay to prevent acid rain lake damage in the northeast united states individual

real options approach to renewable energy investments in mongolia developing nations are seeking alternative energy for electricity and one attractive alternative is renewable energy this research analyzes changing investment environment for renewable energy with real options approach and explores its potential in developing economies through studying the case of mongolia under coal price uncertainty to evaluate comparative attractiveness of either continuing to use coal based infrastructures or switching to renewable energy we formulate social revenue functions for the two environments assuming that renewable energy has lower external costs and coal prices follow geometric brownian motion gbm or geometric mean reverting gmr processes we find the optimal trigger coal prices for switching technologies with some scenarios in electricity price and externality characterize when renewable energy investments become attractive in contrast to conventional wisdom we identify some situations where the value of having more decision opportunities does not exceed that of a now or never decision for switching technologies and welfare losses are incurred the optimal trigger prices are higher in gbm than in gmr and our result raises the possible risks for waiting to switch energy to avoid welfare losses in mongolia the government should increase electricity prices or switch to renewable energy earlier especially when people pay more for the removal of externalities

input use decisions with greater information on crop conditions implications for insurance moral hazard and the environment emerging precision agriculture technologies allow farms to make input decisions with greater information on crop conditions this greater information occurs by providing improved predictions of crop yields using remote sensing and crop simulation models and by allowing farms to apply inputs within the growing season when some crop conditions are already realized we use a stylized model with uncertainty in yield and price to examine how greater information on crop conditions i e a forecast affects input use for insured and uninsured farms we show that moral hazard decreases farms apply more inputs as the forecast accuracy improves when the forecast indicates good yields and vice versa when the forecast indicates bad yields in the long run moral hazard decreases in response to an improvement in forecast accuracy even though moral hazard decreases in the long run indemnity payments are likely to increase in the long run driven by the increase in moral hazard when the forecast indicates bad crop conditions we use the results of our model to discuss the potential impact of different technologies and types of inputs on the federal crop insurance program and the environment

examining the patterns of innovation in low carbon energy science and technology publications and patents of asian emerging economies this paper focuses on selected asian emerging economies the study employs publications and patents as proxies for science and technology and its analysis is divided into three main parts production trends catching up trends and patterns of convergence the findings resulted in four salient points to be considered by policy makers 1 asean 4 lagged significantly behind the more advanced economies korea taiwan and china even though their performance was identical in the early 1990s china has forged ahead in terms of scientific publications and patents production but lags behind in patents quality 2 compared to the world average the region as a whole has high potential to forge ahead in low carbon energy scientific production 3 advanced economies in asia kicked off their low carbon energy science and technology development more from technological rather than scientific production with no straightforward co evolution between the two competencies this demonstrates the need for a strong science based technological foundation and a high level of dynamism for low carbon energy technology development and 4 the economies demonstrated contrasting development trends in their focus between the supply and demand sides of energy technology development the performance of the advanced economies is higher in demand side low carbon energy innovations

valuing non market valuation studies using meta analysis a demonstration using estimates of willingness to pay for water quality improvements abstract a common refrain in the environmental economics literature is the need for additional estimates of environmental and natural resource values yet economists have paid little formal attention to the value of information voi provided by non market valuation studies and whether this value justifies the cost we develop a novel voi model to quantify the benefit of non market valuation studies conducted to expand the body of value estimates in the literature and hence available for use in policy analyses the approach is designed to capitalize on information available through preexisting valuation meta data and can be applied to any valuation meta regression that is suitable to inform policy decisions we illustrate the approach for a prototype nationwide water quality improvement policy in the united states assuming that policy benefits are evaluated using benefit transfer based on a meta regression model of willingness to pay our results suggest that when evaluating nationwide water quality regulations with uncertain net benefits the voi from a typical water quality valuation study will almost certainly exceed the cost we also examine how voi varies with study design features and information gaps in the literature thereby illustrating how the approach can inform research priorities

energy projects in iceland advancing the case for the use of economic valuation techniques to evaluate environmental impacts decision making in iceland has occurred without reference to economic valuations of the environmental impacts of energy projects environmental impact assessments a legal requirement for nearly all energy projects in iceland since 1994 have played an important role in identifying the environmental impacts of energy projects and proposing mitigation measures however a purely qualitative description of environmental impacts is insufficient to ensure that they are accounted for equivalently with all of the other costs and benefits of a proposed project instead as monetary information concerning the welfare gains or losses of proposed projects is not currently required to be provided to the licensing body orkustofnun there is the potential for sub optimal decision making to occur as this paper sets out a broad variety of non market valuation techniques already exist and could be applied to estimate the value of environmental benefits sacrificed to accommodate such developments these methods and their outcomes could be incorporated within mandatory cost benefit assessments for proposed icelandic energy projects communicating an estimate of the full welfare implications of approvals to decision makers and the public alike and fulfilling an oecd demand for the country to commence such processes

regulatory actions under adjustment costs and the resolution of scientific uncertainty food system regulators often decide whether to ban existing practices or approve new technologies without conclusive scientific evidence on possible damage and knowing that resolution is likely in the future in a model with three decision points and stochastic resolution of uncertainty we study interactions between expected losses due to regulation and information availability when a regulator is deciding on an early reversible ban and on a later reversible ban adjustment costs create inertia concerning intermediate signals such that earlier decisions are not overturned and also a bias against imposing an early ban the prospect of more later stage information can increase or decrease the incentive to ban early but research decreases the incentive to ban early

applications of option pricing theory twenty five years later nobel lecture to the memory of alfred nobel december 9 1997 this abstract was borrowed from another version of this item

energy security and sustainability in northeast asia abstract energy security has typically to those involved in making energy policy meant mostly securing access to oil and other fossil fuels with increasingly global diverse energy markets however and increasingly transnational problems resulting from energy transformation and use old energy security rationales are less salient and other issues including climate change and other environmental economic and international considerations are becoming increasingly important as a consequence a more comprehensive operating definition of energy security is needed along with a workable framework for analysis of which future energy paths or scenarios are likely to yield greater energy security in a broader more comprehensive sense work done as a part of the nautilus institute s pacific asia regional energy security pares project developed a broader definition of energy security and described an analytical framework designed to help to compare the energy security characteristics both positive and negative of different quantitative energy paths as developed using software tools such as the leap long range energy alternatives planning system

flexibility learning and irreversibility in environmental decisions a bayesian approach the bayes decision is characterized and studied for a two period decision problem involving a proposed resource development project it is assumed that development is irreversible and that expectations about benefits and costs during the second period vary with experiences resulting from the first period action the amount and types of learning achieved depend upon the particular action taken during the first period flexible sequential decision procedures are compared with fixed once and for all decisions it is shown that under this specification optimal development decisions are not necessarily more conservative when a sequential procedure is used the possibility of reneging on a fixed decision is formally specified and studied

testing for fairness in regulation application to the delhi transportation market i report a remarkable finding that regulatory authorities who have no a priori knowledge of rabin s 1993 fairness axioms associated with a very specific utility function have always proposed legal fares in the auto rickshaw three wheeler market in new delhi that satisfy them regulated fares are ignored by auto rickshaw drivers and customers they bargain on prices among themselves newly announced fare hikes are effective enough to ensure the prevalence of legal uniform non negotiated prices for a considerable amount of time i suggest that the two of the most recent hikes have satisfied rabin s fairness axioms the results i report are robust to different cooperative games of bargaining

renewable energy diffusion in asia can it happen without government support the dramatically increasing population of asia necessitates equally as dramatic increase in energy supply to meet demand rapidly increasing energy demand is a major concern for asian countries because the increase in demand is being met through the increased use of fossil fuel supply largely domestic coal and imported fuel renewable energy supply presents a lower emission pathway that could be a viable option for steering off the higher emissions path however several market economic institutional technical and socio cultural barriers hinder countries in moving from high to low emission pathway following a discussion on the rising demand for energy in asia and the prospects of partly satisfying it with renewable energy we outline the reasons for government support to tackle the barriers for widespread diffusion of grid based renewable energy additionally we also discuss workable models for strategic government intervention to support diffusion of grid based renewable energy in asia

conservation organizations and the option value to preserve an application to debt for nature swaps abstract this paper presents an analytical model of the option to preserve environmental goods motivated by the existence of debt for nature swaps conservation organizations option value arises from the option to reject or accept the terms of a bargain concerning the exchange of the debt holding of a conservation organization for land preservation from the resulting closed form solution of the option to preserve simulations are performed showing the importance of the conservation organization s willingness to pay for preservation and the correlation between the willingness to pay and the value of the asset to be exchanged on the option value

information and the concept of option value this paper examines the arrow fisher henry concept of option value and analyzes its properties including its relationship to the value of information and the effects of increasing uncertainty about the future consequences of irreversible development it is shown that this option value is distinct from but bounded by the value of information in the overall decision problem also it is distinct from a concept of option value that appears in b s bernanke quart j econom 98 85 106 1983 however when there is a continuum of development levels rather than a binary choice between full development and no development some of these conclusions need to be modified

boosting solar investment with limited subsidies rent management and policy learning in india in order to avoid irreversible damage to global ecosystems new green technologies are needed some of which are nowhere near commercial maturity in these cases governments may create temporary rents to make investments artificially attractive but the creation of such rents involves risks of faulty allocation and political capture this article first highlights the importance of managing rents effectively in promoting green technologies it then shows how india s national solar mission has been remarkably effective in triggering solar investments and managing the necessary subsidies e g through a process of competitive reverse bidding for tariffs policy design and implementation also reflect considerable experimentation and learning some risks remain especially regarding the enforceability of renewable energy quotas at the level of indian states

choosing the wrong pond social comparisons in negotiations that reflect a self serving bias we explore the role that choice of comparison groups plays in explaining impasse in teacher contract negotiations we hypothesize that the negotiators select comparable districts in a biased fashion such that teachers salaries in districts that unions view as comparable are higher than teachers salaries in districts that school boards view as comparable we also predict that strike activity is positively related to the difference in the salary levels of the unions and boards lists of comparables we test these predictions using a unique combination of subjective survey and field data on teacher contract negotiations in pennsylvania both hypotheses are supported by the data

nonuse values in benefit cost analysis benefit cost analysis bca is a pragmatic realization of the theory of welfare economics much of the research associated with bca has sought to expand the types of benefits that can be measured in dollar terms with this research there has been a progressive movement of goods and services from the set without measures usually designated as intangibles in bca terminology to the set with for example the recreational services provided by projects associated with dams for hydroelectric power or flood control were regarded as intangible until the development of the travel cost model for estimating the demand for outdoor recreation sites one of the current frontiers in bca research is associated with modeling and measuring nonuse benefits in contrast to the past efforts with intangibles research on this topic has remained controversial with few direct effects on the practice of applied welfare economics there are two principal reasons for this outcome first there has not been an accepted set of definitions for nonuse benefits and second applied studies with empirical estimates of nonuse benefits have until recently been non existent clearly these problems are related a consistent set of definitions is a necessary prerequisite for empirical implementation i will argue that consistent definitions for nonuse benefits have been elusive because the conceptual frameworks used in the literature to describe its primary components option value and existence values are not mutually consistent in the process of demonstrating this result i will describe the elements of a consistent framework for treating both use and nonuse benefits and apply it in explaining some of the problems with the available empirical estimates of nonuse benefits

the economics of sequential choice applied to quasi option value abstract this paper develops a general model that can be used to determine the value of sequential forecasts the model is used 1 to examine the interacting effects of strategies for coping with environmental uncertainty and 2 to explore the relationship between the theories of sequential choice and quasi option value the framework presented bridges these two schools of thought and provides a tool for evaluating one time e g climate change or repetitive e g pollution forecasts of environmental damage

option value a conceptual overview the importance of nonuser benefits to the process of efficiently allocating natural environments was first emphasized by krutilla 15 a decade and a half ago one of the components of these nonuser benefits is option value originally introduced by weisbrod 23 as relevant for assets that might be difficult to reproduce option value has been the subject of considerable debate perhaps the simplest approach to explaining the meaning of option value is to use an example consider an individual who is uncertain whether he or she will consume the services of a particular asset in the future furthermore assume this individual is also uncertain whether the asset will be available in the future should he

local test bed market demand in the transition to leadership the case of the korean mobile handset industry this article proposes that a potentially significant dimension of technological catching up and the transition to leadership lies in the quality and dynamics of the local market rather than in the export market demand as traditionally stressed in catch up studies based on an exploratory analysis of the korean mobile handset industry over the period of the late 1980s to 2005 the paper shows that a transition to leadership in handsets was shaped and driven by domestic users local service suppliers mobile telecommunications operators favorable government policies and strong producer user links forged by manufacturers and operators traditionally local demand in latecomer economies has been considered too small and unsophisticated to stimulate innovation and to enable catching up however in this case local demand evolved and acted as an important test bed for new products services and technologies shaping the rate and direction of the technological development of both local suppliers and operators the conclusion argues that while direct implications for other developing countries cannot be drawn from a single case future research could identify whether under certain circumstances the role of local demand and test bed markets could have wider relevance for other advanced developing nations and other sectors approaching the technology frontier

a qualitative factor analysis of renewable energy and sustainable energy for all se4all in the asia pacific this study assesses the factors responsible for the success and failure of renewable energy access programs in bangladesh china laos mongolia nepal sri lanka india indonesia malaysia and papua new guinea based on 441 research interviews over the course of four years site visits to 90 renewable energy facilities and focus groups with almost 800 community members in 10 countries this study develops a series of overarching qualitative factors that correlate with programs that met their targets sometimes ahead of schedule and produced measurable benefits exceeding costs the inverse of these factors is associated with programs that did not meet their targets were behind schedule and or produced measurable costs exceeding benefits it concludes by offering 10 lessons for energy analysts and development practitioners concerning appropriate technology income generation financing political leadership capacity building programmatic flexibility marketing and awareness stakeholder engagement community ownership and technical standardization

voluntary conservation of endangered species when does no regulatory assurance mean no conservation abstract voluntary conservation agreements are becoming increasingly important in implementing the endangered species act on private land we analyze when such agreements arise and what level of conservation they generate in the presence of uncertainty about future conservation benefits and irreversibility of habitat loss and species extinction our results suggest that the likelihood of an agreement and the resulting conservation levels depend on the background threat of regulation the cost advantage offered by voluntary agreements and the availability of assurances regarding future regulation under conditions likely to hold in practice conservation agreements that offer assurances may generate higher levels of conservation and higher net social benefits than agreements that do not offer assurances however the resulting level of conservation will not be optimal and may be lower than that attainable under regulation

irreversibility and uncertainty cause an intergenerational equity efficiency trade off abstract two important policy goals in intergenerational problems are pareto efficiency and sustainability i e intergenerational equity we demonstrate that the pursuit of these goals is subject to an intergenerational equity efficiency trade off our analysis highlights two salient characteristics of intergenerational problems and policy i temporal irreversibility i e the inability to revise one s past actions and ii uncertainty of future consequences of present actions in human environment systems we employ a two non overlapping generations model that combines an intragenerational production decision on the use of circulating capital and a non renewable resource with a negative intergenerational externality as an unforeseen contingency if initially unknown problems become apparent and policy is enacted after irreversible actions were taken policy making faces a fundamental trade off between ex post pareto efficiency and sustainability that is one can achieve either one of these two goals but not both

impact of energy technology patents in china evidence from a panel cointegration and error correction model abstract enhancing energy technology innovation performance which is widely measured by energy technology patents through energy technology research and development r d activities is a fundamental way to implement energy conservation and emission abatement this study analyzes the effects of r d investment activities economic growth and energy price on energy technology patents in 30 provinces of china over the period 1999 2013 several unit root tests indicate that all the above variables are generated by panel unit root processes and a panel cointegration model is confirmed among the variables in order to ensure the consistency of the estimators the fully modified ols fmols method is adopted and the results indicate that r d investment activities and economic growth have positive effects on energy technology patents while energy price has a negative effect however the panel error correction models indicate that the cointegration relationship helps to promote economic growth but it reduces r d investment and energy price in the short term therefore market oriented measures including financial support and technical transformation policies for the development of low carbon energy technologies an effective energy price mechanism especially the targeted fossil fuel subsidies and their die away mode are vital in promoting china s energy technology innovation

the value of flexibility preservation remediation or development for ginostra we are concerned with land allocation andinvestment decisions when dealing withpartially degraded areas that might be 1 remediated and returned to a more natural state or 2 irreversibly developed this type ofproblem seems particularly relevant in europewhere the issue of wilderness conservation isof less concern than the remediation oflandscapes which have been altered by previouseconomic activities traditional expectedpresent value analysis will fail to capture thevalue of investments that might be undertakensequentially or when certain investments areirreversible we show how to determine withina discrete time stochastic model the optimaladaptive development strategy and how tocalculate the option value of flexibility thetheoretical model is then applied to ginostra a town on stromboli an island off the southerncoast of italy