Risk problems identifying optimal pollution level

Abstract

The determination of the optimal pollution level is essential in Environmental Economics. The associated risk in evaluating this optimal pollution level and the related Benefit Area (BA), is based on various factors. At the same time the uncertainty in the model fitting can be reduced by choosing the appropriate approximations for the abatement and damage marginal cost functions. The target of this paper is to identify analytically and empirically the Benefit Area (BA) in the case of quadratic marginal damage and linear marginal abatement cost functions, extending the work of (Halkos and Kitsos, Appl. Econ. 37:1475–1483, 2005, [9]). © Springer International Publishing Switzerland 2015.