Environmental prices, uncertainty and learning

Simon Dietz and Sam Fankhauser ()

No 10, GRI Working Papers from Grantham Research Institute on Climate Change and the Environment

Abstract: There is an increasing demand for putting a shadow price on the environment to guide public policy and incentivise private behaviour. In practice, setting that price can be extremely difficult as uncertainties abound. There is often uncertainty not just about individual parameters but about the structure of the problem and how to model it. A further complication is the second-best nature of real environmental policy making. In this paper, we propose some practical steps for setting prices in the face of these difficulties, drawing on the example of climate change. We consider how to determine the overall target for environmental protection, how to set shadow prices to deliver that target, and how we can learn from the performance of policies to revise targets and prices. Perhaps most significantly, we suggest that estimates of the marginal cost of environmental protection, rather than the marginal benefit, will often provide the more consistent and robust prices for achieving targets.

Date: 2009-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.lse.ac.uk/GranthamInstitute/wp-content/ ... 2/WorkingPaper10.pdf (application/pdf)

Related works:
Journal Article: Environmental prices, uncertainty, and learning (2010)
Working Paper: Environmental prices, uncertainty, and learning (2010)
Working Paper: Environmental prices, uncertainty and learning (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lsg:lsgwps:wp10

Access Statistics for this paper

More papers in GRI Working Papers from Grantham Research Institute on Climate Change and the Environment Contact information at EDIRC.
Bibliographic data for series maintained by The GRI Administration ().