Risk Problems Identifying Optimal Pollution Level
The determination of the optimal pollution level is essential in Environmental Economics. The associated risk in evaluating this optimal pollution level and the related Benefit Area (BA), is based on various factors. At the same time the uncertainty in the model fitting can be reduced by choosing the appropriate approximations for the abatement and damage marginal cost functions. The target of this paper is to identify analytically and empirically the Benefit Area (BA) in the case of quadratic marginal damage and linear marginal abatement cost functions, extending the work of (Halkos and Kitsos, Appl. Econ. 37:1475–1483, 2005, ).
KeywordsOptimal pollution level Risk Benefit area
This research has been co-financed by the European Union (European Social Fund ESF) and Greek national funds through the Operational Program “Education and Lifelong Learning” of the National Strategic Reference Framework (NSRF) - Research Funding Program: Heracleitus II. Investing in knowledge society through the European Social Fund. D.K would like to express its gratitude to Heracleitus II for the financial support.
Thanks are also due to three anonymous reviewers for their helpful and constructive comments in an earlier draft of our paper as well as to the participants in the 5th International Conference on Risk Analysis (Biomedicine, Environmetrics, Economics, Finance & Reliability) in the Polytechnic Institute at Tomar, Portugal (30 May-1 June 2013) for their encouraging comments.
An extended version of this presentation with the consideration of all combinations of linear, quadratic and exponential abatement and damage cost functions as well as the relation to the existing relative literature can be fount in .
- 1.EMEP.: Airborne transboundary transport of sulphur and nitrogen over Europe: model description and calculations. EMEP/MSC-W reports (various years)Google Scholar
- 2.Halkos, G.: Economic perspectives of the acid rain problem in Europe. Ph.D. thesis, Department of Economics and Related Studies, University of York (1992)Google Scholar
- 3.Halkos, G.: An evaluation of the direct costs of abatement under the main desulphurisation technologies. MPRA paper 32588, University Library of Munich, Germany (1993)Google Scholar
- 5.Halkos, G.: Incomplete information in the acid rain game. Empirica J. Appl. Econ. Econ. Policy 23(2), 129–148 (1996)Google Scholar
- 6.Halkos, G.: Modeling optimal nitrogen oxides abatement in Europe. MPRA paper 33132, University Library of Munich, Germany (1997)Google Scholar
- 7.Halkos, G.E.: Econometrics: Theory and Practice. Giourdas Publications, Athens (2006)Google Scholar
- 8.Halkos, G.: Construction of abatement cost curves: the case of F-gases. MPRA paper 26532, University Library of Munich, Germany (2010)Google Scholar
- 10.Halkos, G., Kitsou, D.: Uncertainty in optimal pollution levels: modeling the benefit area.J. Environ. Plan. Manag. 58(4), 678-700 (2015). doi: 10.1080/09640568.2014.881333
- 11.Halkos, G.E., Tzeremes, N.G.: Economic efficiency and growth in the EU enlargement.J. Policy Model. 31(6), 847–862 (2009)Google Scholar
- 14.Kitsou, D.: Estimating damage and abatement cost functions to define appropriate environmental policies. Ph.D. thesis, University of Thessaly (2014)Google Scholar
- 15.Kneese, A.V.: Rationalizing decisions in the quality management of water supply in urban-industrial areas. In: Edel, M., Rothenberg, J. (eds.) Readings in Urban Economics. The MacMillan Company, New York (1972)Google Scholar