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REGULATING ENVIRONMENTAL THREATS AgEcon
Tsur, Yacov; Zemel, Amos.
Environmental consequences of natural resource exploitation often entail threats of future occurrences of detrimental abrupt events rather than (or in addition to) inflicting a damage gradually. The possibility of abrupt occurrence of climate-change related calamities is a case in mind. The uncertainty associated with the realization of these threats and their public-bad nature complicate the determination of optimal economic response. We analyze the regulation of such environmental threats by means of a Pigouvian hazard tax, based on the shadow cost of the hazard-generating activities. A numerical example illustrates possible effects of the proposed regulation scheme.
Tipo: Working or Discussion Paper Palavras-chave: Environmental events; Emission; Climate change; Regulation; Pigouvian tax; Hazard rate; Uncertainty; Environmental Economics and Policy; H23; H41; O13; Q54; Q58.
Ano: 2006 URL: http://purl.umn.edu/7150
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