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Kawa, Lanya, 2016. The value of perfect information : application to the uncertain time lag of benefits from abatement in the Baltic Sea. Second cycle, A2E. Uppsala: SLU, Dept. of Economics

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Abstract

Eutrophication from nitrogen and phosphorus has damaged the Baltic Sea, leaving large sea bottom areas without biological life, thus changing the marine ecosystem, and triggering the growth of toxic algae. Despite efforts to curb this pollution, the sea remains eutrophic. We argue that eutrophication management is subject to both uncertainty and irreversibility, and hence could explain why impacted countries may not be willing to enforce load reduction targets. This thesis focuses on the time lag of benefits following nitrogen abatement. The time taken for concentration levels to decrease after abatement is uncertain, leading to uncertain benefits. Using the quasi option value model, we calculate the value of learning this information, and thus find that removing this uncertainty is worth over 8.6 billion EUR, to all bordering countries. This could be of significant importance for actors rationally waiting for more information, before implementing expensive and irreversible policy.

Main title:The value of perfect information
Subtitle:application to the uncertain time lag of benefits from abatement in the Baltic Sea
Authors:Kawa, Lanya
Supervisor:Elofsson, Katarina
Examiner:Hess, Sebastian
Series:Examensarbete / SLU, Institutionen för ekonomi
Volume/Sequential designation:1046
Year of Publication:2016
Level and depth descriptor:Second cycle, A2E
Student's programme affiliation:NM005 Environmental Economics and Management - Master's Programme 120 HEC
Department:(NL, NJ) > Dept. of Economics
Keywords:abatement, eutrophication, irreversibility, quasi option value, value of information
URN:NBN:urn:nbn:se:slu:epsilon-s-5924
Permanent URL:
http://urn.kb.se/resolve?urn=urn:nbn:se:slu:epsilon-s-5924
Subjects:Extension
Pollution
Language:English
Deposited On:06 Oct 2016 14:30
Metadata Last Modified:06 Oct 2016 14:30

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