Open AccessENVIRONMENTAL UNCERTAINTY AND THE TIMING OF ENVIRONMENTAL POLICY
Author(s) -
SAPHORES JEANDANIEL M.
Publication year - 2004
Publication title -
natural resource modeling
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.28
H-Index - 32
eISSN - 1939-7445
pISSN - 0890-8575
DOI - 10.1111/j.1939-7445.2004.tb00132.x
Subject(s) - stock (firearms) , damages , environmental science , greenhouse gas , pollutant , investment (military) , economics , econometrics , natural resource economics , climate change , ecology , engineering , mechanical engineering , politics , political science , law , biology
. This paper shows that the timing of an investment to reduce the emissions of a stock pollutant under environmental uncertainty depends on the specification of uncertainty, on its level, and on the presence of a lower reflecting barrier for the stock pollutant. With quadratic damages, when variability increases with the level of pollution, emissions should be curbed immediately when uncertainty is large enough; when uncertainty is small, however, its impact is ambiguous. A lower reflecting barrier may also significantly influence the investment threshold. These results highlight the importance of better understanding the links between greenhouse gas concentration and weather variability.