Using Ex Post Data to Estimate the Hurdle Rate of Abatement Investments - An Application to the Swedish Pulp and Paper Industry and Energy Sector
We propose a method for estimating 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 econometric procedure is illustrated using a panel of firms from the Swedish pulp and paper industry, and the energy and heating sector from 2000 to 2003. The results indicate a hurdle rate of investment of almost 3 in the pulp and paper industry and almost 4 in the energy and heating sector. <p>
Year of publication: |
2007-03-21
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Authors: | Löfgren, Åsa ; Millock, Katrin ; Nauges, Céline |
Institutions: | Nationalekonomiska institutionen, Handelshögskolan |
Subject: | option value | fuel price uncertainty | investment decision | pollution abatement | panel data pulp and paper industry | energy and heating sector |
Saved in:
freely available
Extent: | text/html |
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Series: | |
Type of publication: | Book / Working Paper |
Notes: | The text is part of a series Working Papers in Economics Number 249 30 pages |
Classification: | C33 - Models with Panel Data ; D81 - Criteria for Decision-Making under Risk and Uncertainty ; O33 - Technological Change: Choices and Consequences; Diffusion Processes ; Q48 - Government Policy ; Q53 - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste |
Source: |
Persistent link: https://www.econbiz.de/10005651691