The effect of uncertainty on pollution abatement investments : Measuring hurdle rates for Swedish industry

Lofgren, Asa, Millock, Katrin and Nauges, Celine (2008) The effect of uncertainty on pollution abatement investments : Measuring hurdle rates for Swedish industry. Resource & Energy Economics, 30 4: 475-491. doi:10.1016/j.reseneeco.2008.09.002


Author Lofgren, Asa
Millock, Katrin
Nauges, Celine
Title The effect of uncertainty on pollution abatement investments : Measuring hurdle rates for Swedish industry
Journal name Resource & Energy Economics   Check publisher's open access policy
ISSN 0928-7655
Publication date 2008-12
Sub-type Article (original research)
DOI 10.1016/j.reseneeco.2008.09.002
Volume 30
Issue 4
Start page 475
End page 491
Total pages 17
Place of publication Netherlands
Publisher Elsevier BV * North-Holland
Language eng
Formatted abstract
We estimate hurdle rates for firms' investments in pollution abatement technology, using ex post data. The method is based on a structural option value model where the future price of polluting fuel is the major source of uncertainty facing the firm. The empirical procedure is illustrated using a panel of firms from the Swedish pulp and paper industry, and the energy and heating sector, and their sulfur dioxide emissions over the period 2000-2003. The results indicate that hurdle rates of investment vary from 2.7 to 3.1 in the pulp and paper industry and from 3.4 to 3.6 in the energy and heating sector depending on econometric specification. © 2008 Elsevier B.V. All rights reserved.
Keyword Abatement investment
Energy and heating sector
Oil price uncertainty
Option value
Pulp and paper industry
Sulfur emissions
Q-Index Code C1
Q-Index Status Provisional Code
Institutional Status Unknown

Document type: Journal Article
Sub-type: Article (original research)
Collection: School of Economics Publications
 
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Created: Thu, 29 Sep 2011, 15:40:57 EST by Alys Hohnen on behalf of School of Economics