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Measuring sustainability under regime shift uncertainty: a resilience pricing approach

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  • MÄLER, KARL-GÖRAN
  • LI, CHUAN-ZHONG

Abstract

This paper is concerned with the theory of resilience pricing and sustainability measurement in the presence of risk for regime shift in a dynamic economy–environment system. Following Holling (Annual Review of Ecology and Systematics, vol. 4, 1973, pp. 1–23), we consider resilience as the maximal perturbation that the system can absorb without flipping into a qualitatively different state. Using a multisector growth model under uncertainty, we derive the shadow price of resilience that affects the probabilities of the system to flip in the future. We also analyze the role of resilience on sustainability with both ex-ante and ex-post welfare measures.

Suggested Citation

  • Mäler, Karl-Göran & Li, Chuan-Zhong, 2010. "Measuring sustainability under regime shift uncertainty: a resilience pricing approach," Environment and Development Economics, Cambridge University Press, vol. 15(6), pages 707-719, December.
    • Handle: RePEc:cup:endeec:v:15:y:2010:i:06:p:707-719_00
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    1. Karl-Göran Mäler, 2008. "Sustainable Development and Resilience in Ecosystems," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 39(1), pages 17-24, January.
    2. Brian Walker & Leonie Pearson & Michael Harris & Karl-Göran Maler & Chuan-Zhong Li & Reinette Biggs & Tim Baynes, 2010. "Incorporating Resilience in the Assessment of Inclusive Wealth: An Example from South East Australia," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 45(2), pages 183-202, February.
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    1. Hahn, Thomas & Sioen, Giles B. & Gasparatos, Alexandros & Elmqvist, Thomas & Brondizio, Eduardo & Gómez-Baggethun, Erik & Folke, Carl & Setiawati, Martiwi Diah & Atmaja, Tri & Arini, Enggar Yustisi & , 2023. "Insurance value of biodiversity in the Anthropocene is the full resilience value," Ecological Economics, Elsevier, vol. 208(C).
    2. Rintaro Yamaguchi & Moinul Islam & Shunsuke Managi, 2019. "Inclusive wealth in the twenty-first century: a summary and further discussion of Inclusive Wealth Report 2018," Letters in Spatial and Resource Sciences, Springer, vol. 12(2), pages 101-111, August.
    3. Tobon Orozco, David & Molina Guerra, Carlos & Vargas Cano, John Harvey, 2016. "Extent of Expected Pigouvian Taxes and Permits for Environmental Services in a General Equilibrium Model with a natural capital constraint," Borradores Departamento de Economía 15258, Universidad de Antioquia, CIE.
    4. Chen, Yong & Gibson, Nathan & Biswas, Arpan & Li, An & Bashiri, Hamid & Sharifi, Erfaneh & Fuentes, Claudio & Hoyle, Christopher & Leon, Arturo S. & Skypeck, Christopher J., 2021. "Valuation of operational flexibility: A case study of Bonneville power administration," Energy Economics, Elsevier, vol. 98(C).
    5. Villamayor-Tomas, Sergio & Sagebiel, Julian & Rommel, Jens & Olschewski, Roland, 2021. "Types of collective action problems and farmers’ willingness to accept agri-environmental schemes in Switzerland," Ecosystem Services, Elsevier, vol. 50(C).
    6. Yamaguchi, Rintaro, 2020. "Available capital, utilized capital, and shadow prices in inclusive wealth accounting," Ecological Economics, Elsevier, vol. 169(C).
    7. Chuan-Zhong Li & Sebastian Villasante & Xueqin Zhu, 2016. "Regime Shifts and Resilience in Fisheries Management: A Case Study of the Argentinean Hake fishery," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 65(3), pages 623-637, November.
    8. Chuan-Zhong Li & Gunnar Isacsson, 2012. "Valuing urban accessibility and air quality in Sweden," Empirical Economics, Springer, vol. 42(3), pages 881-898, June.
    9. Dallimer, Martin & Martin-Ortega, Julia & Rendon, Olivia & Afionis, Stavros & Bark, Rosalind & Gordon, Iain J. & Paavola, Jouni, 2020. "Taking stock of the empirical evidence on the insurance value of ecosystems," Ecological Economics, Elsevier, vol. 167(C).
    10. Polasky, Stephen & de Zeeuw, Aart & Wagener, Florian, 2011. "Optimal management with potential regime shifts," Journal of Environmental Economics and Management, Elsevier, vol. 62(2), pages 229-240, September.
    11. Ben Heijdra & Pim Heijnen, 2013. "Environmental Abatement and the Macroeconomy in the Presence of Ecological Thresholds," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 55(1), pages 47-70, May.
    12. Chuan-Zhong Li & Ranjula Bali Swain, 2016. "Growth, Water Resilience, and Sustainability: A DSGE Model Applied to South Africa," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 2(04), pages 1-23, December.
    13. Zhaohua, Wang & Jingyun, Li & Bin, Lu & Bo, Wang & Bin, Zhang & Kaining, Sun & Mao, Fan, 2023. "Effectiveness and risk of initial carbon quota allocation principle under the uncertainty of the Chinese electricity market," China Economic Review, Elsevier, vol. 77(C).
    14. Dragicevic, Arnaud Z. & Shogren, Jason F., 2021. "Preservation Value in Socio-Ecological Systems," Ecological Modelling, Elsevier, vol. 443(C).
    15. Valente, Donatella & Miglietta, Pier Paolo & Porrini, Donatella & Pasimeni, Maria Rita & Zurlini, Giovanni & Petrosillo, Irene, 2019. "A first analysis on the need to integrate ecological aspects into financial insurance," Ecological Modelling, Elsevier, vol. 392(C), pages 117-127.
    16. Thomas Knoke & Carola Paul & Elizabeth Gosling & Isabelle Jarisch & Johannes Mohr & Rupert Seidl, 2023. "Assessing the Economic Resilience of Different Management Systems to Severe Forest Disturbance," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 84(2), pages 343-381, February.

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    More about this item

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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