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Irreversibilities and the Optimal Timing of Environmental Policy under Knightian Uncertainty


Takao Asano


Okayama University - Economics; Osaka University - Institute of Social and Economic Research (ISER)

October 2005

Institute of Social and Economic Research at Osaka University Discussion Paper No. 643

Abstract:     
In this paper, we consider a problem in environmental policy design by applying optimal stopping rules. The purpose of this paper is to analyze the optimal timings at which the government should adopt environmental policies to deal with increases in greenhouse gas concentrations and to reduce emissions of SO2 or CO2 under the continuous-time Knightian uncertainty. Furthermore, we analyze the effects of increases in Knightian uncertainty on optimal environmental policies and the reservation value.

Number of Pages in PDF File: 33

Keywords: Knightian Uncertainty, Environmental Policy, Irreversibilities

JEL Classification: D81, H23, L51, Q23

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Date posted: November 14, 2005  

Suggested Citation

Asano, Takao, Irreversibilities and the Optimal Timing of Environmental Policy under Knightian Uncertainty (October 2005). Institute of Social and Economic Research at Osaka University Discussion Paper No. 643. Available at SSRN: http://ssrn.com/abstract=819604 or http://dx.doi.org/10.2139/ssrn.819604

Contact Information

Takao Asano (Contact Author)
Okayama University - Economics ( email )
Tsushima-naka 3-1-1
Okayama, Okayama 7008530
Japan
Osaka University - Institute of Social and Economic Research (ISER) ( email )
6-1 Mihogaoka
Ibaraki, Osaka 567-0047
Japan
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