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When Should Uncertain Nonpoint Emissions Be Penalized in a Trading Program?
David A. Hennessy and Hongli Feng
American Journal of Agricultural Economics
Vol. 90, No. 1 (Feb., 2008), pp. 249-255
Stable URL: http://www.jstor.org/stable/30139503
Page Count: 7
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When nonpoint source pollution is stochastic and the damage function is convex, intuition might suggest it is more important to control a nonpoint pollution source than a point source. Earlier research has provided sufficient conditions such that the permit price for a unit of ex-ante expected emissions should be higher than the permit price for a unit of certain emissions. Herein we provide a set of necessary and sufficient conditions such that this is the case. An approach to testing for the validity of the condition set is available, and has been applied to a related problem.
American Journal of Agricultural Economics © 2008 Agricultural & Applied Economics Association