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Environmental Policy Uncertainty and Marketable Permit Systems: The Dutch Phosphate Quota Program
Author(s) -
Wossink Ada,
Gardebroek Cornelis
Publication year - 2006
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/j.1467-8276.2006.00836.x
Subject(s) - production (economics) , economics , investment (military) , environmental policy , public economics , microeconomics , natural resource economics , politics , political science , law
Tradable permits are generally considered as an efficient instrument to regulate pollution by individual producers. However, uncertainty about changes in or possible discontinuation of the program could make individual farmers reluctant to invest in tradable permits. This article uses the option approach to derive a theoretical model that shows the impact of policy uncertainty on investment in tradable quota. The empirical assessment provides weak evidence for the existence of option values due to policy uncertainty for phosphate quota in swine production in the Netherlands.