Since uncertainty and irreversibility are inherent, environmental policy involves the problems of timing of implementation. Environmental policy based on cost-benefit analysis using certainty equivalent presents values can be misleading under the combined effect of irreversibility and uncertainty.
Using real options method, the thesis analyzes the timing of early action investment in Canada's Kyoto commitment. Early action investment in emission reductions is irreversible. The thesis uses a simple two-period model, and then lays out a corresponding continuous-time model to show that under technological uncertainty, early action investment should be delayed until more information - the results of R&D - is revealed. In particular, the more uncertain the outcome of research, the more the firm should delay early action investment.
The thesis argues that Canada's Kyoto commitment is well intentioned but not wisely implemented: early action investment on emission reductions may not be efficient. The results suggest that a more gradual Kyoto program would be favourable.
Identifer | oai:union.ndltd.org:USASK/oai:usask.ca:etd-09112003-133104 |
Date | 15 September 2003 |
Creators | Ma, Lingjuan |
Contributors | St. Louis, Larry, Nolan, James F., Huq, M. Mobinul, Gilchrist, Donald, Zhao, Jingang |
Publisher | University of Saskatchewan |
Source Sets | University of Saskatchewan Library |
Language | English |
Detected Language | English |
Type | text |
Format | application/pdf |
Source | http://library.usask.ca/theses/available/etd-09112003-133104/ |
Rights | unrestricted, I hereby certify that, if appropriate, I have obtained and attached hereto a written permission statement from the owner(s) of each third party copyrighted matter to be included in my thesis, dissertation, or project report, allowing distribution as specified below. I certify that the version I submitted is the same as that approved by my advisory committee. I hereby grant to University of Saskatchewan or its agents the non-exclusive license to archive and make accessible, under the conditions specified below, my thesis, dissertation, or project report in whole or in part in all forms of media, now or hereafter known. I retain all other ownership rights to the copyright of the thesis, dissertation or project report. I also retain the right to use in future works (such as articles or books) all or part of this thesis, dissertation, or project report. |
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