Environmental policy uncertainty and marketable permit systems: The Dutch phosphate quota program

Ada Wossink; Cornelis Gardebroek

doi:10.1111/j.1467-8276.2006.00836.x

Environmental policy uncertainty and marketable permit systems: The Dutch phosphate quota program

Ada Wossink, Cornelis Gardebroek

Economics

Research output: Contribution to journal › Article › peer-review

Abstract

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. Copyright 2006 American Agricultural Economics Association.

Original language	English
Pages (from-to)	16-27
Number of pages	11
Journal	American Journal of Agricultural Economics
Volume	88
Issue number	1
DOIs	https://doi.org/10.1111/j.1467-8276.2006.00836.x
Publication status	Published - Feb 2006

Keywords

Jump-diffusion
Policy risk
Real options
Switching regression model
Tradable permits
Transaction cost

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10.1111/j.1467-8276.2006.00836.x

Cite this

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abstract = "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. Copyright 2006 American Agricultural Economics Association.",

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KW - Switching regression model

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KW - Transaction cost

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Environmental policy uncertainty and marketable permit systems: The Dutch phosphate quota program

Abstract

Keywords

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