Due to the high degree of uncertainty and complexity of environmental effects, estimates of environmental damage costs tend to vary significantly from one study to another. It is often difficult for the policy maker or analyst to choose reasonable estimates of environmental externality adders in policy analysis. In this paper, we propose an approach to synthesizing estimates of environmental externality adders given in different sources using the Finite Mixture Distribution statistical technique and the Analytic Hierarchy Process multi-attribute analysis method. We present the results of the marginal social costs of C02 obtained using the proposed approach and the possible applications of these results in environmental studies.
Get full access to this article
View all access options for this article.
References
1.
AyresR.WalterJ. (1991), “The Greenhouse Effect: Damage, Costs and Abatement”, Environmental and Resource Economics, Vol. 1, No. 2, pp 237–270.
2.
BhattacharyaC.G. (1967), “A Simple Method of Resolution of a Distribution into Gaussian Components”, Biometrics, Vol. 23, No. 1, pp 115–35.
3.
BlichkeW.R. (1978), “Mixtures of Distributions”, in (eds.) KruskalW.H., International Encyclopedia of Statistics, The Free Press, New York.
4.
ClineW.R. (1992), The Economics of Global Warming, Institute for International Economics, Washington, DC.
5.
EverittB.S.HandD.J. (1981), Finite Mixture Distributions, Chapman and Hall Ltd, 11 New Fetter Lane, London EC4P 4EE.
6.
FankhauserS. (1994), “The Social Costs of Greenhouse Gas Emissions: An Expected Value Approach”, The Energy Journal, Vol. 15, No. 2, pp 157–184.
7.
FankhauserS. (1995), “Protection versus Retreat: The Economic Costs of Sea-level Rise”, Environment and Planning A, Vol. 27, No. 2, pp 299–319.
8.
GregorJ. (1969), “An Algorithm for the Decomposition of a Distribution into Gaussian Components”, Biometrics, Vol. 25, No. 1, pp 79–93.
9.
HoelM.IsaksenI. (1993), “Efficient Abatement of Different Greenhouse Gases”, Memorandum No. 5, Department of Economics, University of Oslo.
10.
HohmeyerO. (1988), Social Costs of Energy Consumption: External Effects of Electricity Generation in the Federal Republic of Germany, Springer, Berlin.
11.
Intergovernmental Panel on Climate Change (1992), Climate Change 1992: The Supplementary Report to the IPCC Scientific Assessment, Cambridge University Press, Cambridge.
12.
JiangS.KececiogluD. (1992), “Maximum Likelihood Estimates from Censored Data with Mixed-Weibull Distributions”, IEEE Transactions on Reliability, Vol. 41, No. 2, pp 248–255.
13.
JoffeA.D. (1964), “Mixed Exponential Estimation by the Method of Half Moments”, Applied Statistics, Vol. 13, No. 1, pp 91–98.
14.
KececiogluD.SunF.B. (1994), “Mixed-Weibull Parameter Estimation for Burn-in-Data Using Bayesian Approach”, Microelectronics Reliability, Vol. 34, No. 10, pp 1657–1679.
15.
LockwoodB. (1992), The Social Costs of Electricity Generation, Environmental Change Working Paper GEC 92–09, Centre for Social and Economic Research on the Global Environment, University College London and University of East Anglia.
16.
NordhausW.D. (1991a), “A Sketch of the Economics of the Greenhouse Effect”, American Economic Review, Papers and Proceedings, Vol. 81, No. 2, pp 146–150.
17.
NordhausW.D. (1991b), “To Slow or not to Slow: The Economics of the Greenhouse Effects”, Economic Journal, Vol. 101, No. 407, pp 920–937.
18.
NordhausW.D. (1993a), “Optimal Greenhouse Gas Reductions and Tax Policy in the ‘DICE’ Model”, American Economic Review, Papers and Proceedings, Vol. 83, No. 2, pp 313–317.
19.
NordhausW.D. (1993b), “Rolling the ‘DICE’: An Optimal Transition Path for Controlling Greenhouse Gases”, Resources and Energy Economics, Vol. 15, No. 1, pp 27–50.
20.
PACE (1990), Environmental Costs of Electricity, Pace University Centre for Environmental and Legal Studies, New York, Oceana Publications.
21.
ParkinsonD.B. (1991), “The Effects of Variable Sampling on Component Reliability”, IEEE Transactions on Reliability, Vol. 40, No. 1, pp 110–112.
22.
ParryM. (1993), “Climate Change and the Future of Agriculture”, International Journal of Environmental and Pollution, Vol. 3, No. 1–3, pp 13–30.
23.
PearceD.W. (1992), The Secondary Benefits of Greenhouse Gas Control, Global Environmental Change Working Paper GEC 92–12, Centre for Social and Economic Research on the Global Environment, University College London and University of East Anglia.
24.
PeckS.C.TeisbergT.J. (1992), “CETA: A Model for Carbon Emissions Trajectory Assessment”, The Energy Journal, Vol. 13, No. 1, pp 55–77.
25.
PeterR.I.LovejoyT.E. (1992), Global Warming and Biological Diversity, New Haven, Yale University Press.
26.
SaatyT.L. (1980), The Analytic Hierarchy Process, McGraw-Hill, New York.
27.
SaatyT.L.VargasL.G. (1982), The Logic of Priorities, Kluwer Nijhoff, Boston.
28.
TitusJ.ParkR.A.LeathermanS.P.WeggelJ.R.GreeneM.S.MauselP.W.BrownS.GauntC.TrehanM.YoheG. (1991), “Greenhouse Effect and Sea Level Rise: The Cost of Holding Back the Sea”, Coastal Zone Management, Vol. 19, No. 2 pp 172–204.
29.
WaggonerP.E. (1990), Climate Change and US Water Resources, Wiley, New York.
30.
World Health Organisation (1990), Potential Health Effects of Climate Change, WHO, Geneva.
