Working Paper Series, Department Economics, Swedish University of Agricultural Sciences
Cost-effective management of a eutrophicated sea in the presence of uncertain technological development and climate change
() and Martin Lindqvist
Abstract: We analyse effects of uncertain climate change and
technological development on cost-effective abatement of nitrogen and
phosphorus for a eutrophied sea. A dynamic model is developed which
accounts for differences in the sea’s adjustment to the loads of the two
nutrients, uncertainty in climate change effects with probabilistic
constraints on nutrient pool targets, and uncertain technological
development in a mean-variance framework. The analytical results show that
introduction of uncertainty increases abatement costs but that the effect
on marginal abatement cost differ for the two types of uncertainty.
Marginal abatement cost is increased by technological uncertainty but
decreased by the reduction in the risk discount of climate change
uncertainties. It is also shown that abatement along the optimal time path
is delayed by the introduction of technological uncertainty, but made
earlier when considering climate change uncertainty. An application to the
eutrophied Baltic Sea indicates that climate change and technological
development can reduce total abatement cost by 1/3, but also increase it
considerably when uncertainty is included.
Keywords: cost-effectiveness; nutrients; climate change; technological development; uncertainty; Baltic Sea; (follow links to similar papers)
JEL-Codes: D99; O13; Q52; Q53; Q54; (follow links to similar papers)
32 pages, January 21, 2014
Before downloading any of the electronic versions below
you should read our statement on
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
Full text file
Questions (including download problems) about the papers in this series should be directed to Elizabeth Hillerius ()
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Design by Joachim Ekebom