Arbeitspapier

Stranded assets: How policy uncertainty affects capital, growth, and the environment

Standard environmental economics prescribes policies which are optimal and implemented immediately. The paper argues that, in reality, environmental policy often deviates from the optimum and implementation is not deterministic but subject to major uncertainty and frequent change. We present a model with a stochastic policy process that affects investors' decisions and the composition of capital. We assume that pollution is reduced by private green services and public abatement. The government subsidizes green services and taxes dirty capital albeit at a rate which may become random, causing unexpected capital write-offs. Tax jumps depend on environmental degradation and the share of green services. We show how policy uncertainty affects capital valuation and how it alters individual portfolios, green services, and economic growth.

Sprache
Englisch

Erschienen in
Series: Economics Working Paper Series ; No. 18/288

Klassifikation
Wirtschaft
Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
Climate; Natural Disasters and Their Management; Global Warming
Economic Development: General
Thema
Policy uncertainty
stranded assets
private abatement
stochastic growth

Ereignis
Geistige Schöpfung
(wer)
Bretschger, Lucas
Soretz, Susanne
Ereignis
Veröffentlichung
(wer)
ETH Zurich, CER-ETH - Center of Economic Research
(wo)
Zurich
(wann)
2018

DOI
doi:10.3929/ethz-b-000255552
Handle
Letzte Aktualisierung
10.03.2025, 11:42 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Bretschger, Lucas
  • Soretz, Susanne
  • ETH Zurich, CER-ETH - Center of Economic Research

Entstanden

  • 2018

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