When Should Uncertain Non-point Emissions Be Penalized in a Trading Program?

Posted: 29 Jan 2008

See all articles by David A. Hennessy

David A. Hennessy

Iowa State University - Department of Economics

Hongli Feng

Iowa State University - Center for Agriculture and Rural Development (CARD)

Date Written: 2007-04

Abstract

When non-point source pollution is stochastic and the damage function is convex, intuition might suggest it is more important to control a non-point pollution source than a point source. Earlier research has provided sufficient conditions such that the permit price for a unit of ex-ante expected emissions should be higher than the permit price for a unit of certain emissions. Herein we provide a set of necessary and sufficient conditions such that this is the case. An approach to testing for the validity of the condition set is available, and has been applied to a related problem.

Suggested Citation

Hennessy, David A. and Feng, Hongli, When Should Uncertain Non-point Emissions Be Penalized in a Trading Program? (2007-04). American Journal of Agricultural Economics, Vol. 90, Issue 1, pp. 249-255, February 2008, Available at SSRN: https://ssrn.com/abstract=1087622 or http://dx.doi.org/10.1111/j.1467-8276.2007.01043.x

David A. Hennessy (Contact Author)

Iowa State University - Department of Economics ( email )

260 Heady Hall
Ames, IA 50011
United States
515-294-6171 (Phone)

Hongli Feng

Iowa State University - Center for Agriculture and Rural Development (CARD) ( email )

Ames, IA 50011
United States

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