Options: applications to resource and environmental economics.

Summary Many environmental policies operate on the principle of pollution thresholds above which environmental protection measures are triggered. However, economic theory says little about their validity. The purpose of this paper is to fill this gap. The recognition of the role played by technological change in pollution control is the main thread of the proposed response. The major characteristic of these changes is their irreversibility. This is particularly important when the pollution considered is a stock pollution: a dynamic approach to the problem is therefore proposed. It is coupled with a stochastic approach intended to integrate the uncertainty on the evolution of the pollution and its effects. The first part of the work is devoted to the presentation and discussion of the tools used. Initially developed to deal with investment choices, the recent theory of <> has proven to be a particularly adequate tool for analyzing issues of irreversibility and uncertainty in the field of resources and the environment. A synthesis of the notion of real option and those of quasi-option value and option price, which are older and specific to the economics of resources and the environment, is proposed. It allows us to better dissociate the effects of irreversibility from those of uncertainty. Once these precisions have been made, a model justifying the use of pollution thresholds from an economic point of view is developed throughout the second part. The model differs from the usual models of real options by the fact that the decision considered here, the technological change, affects the evolution of the variable of interest of the problem, the pollution. The technological aspects and the interest of an environmental tax are more particularly studied. An application to the case of the greenhouse effect illustrates the point.