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Optimal timing of environmental policy under partial information

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  • Pablo Garcia

Abstract

I explore the optimal timing of environmental policy when the stock of natural capital is unobserved and can only be imperfectly measured. I present two key insights. First, noisy signals about the natural capital stock blur the inference process, thereby easing the conditions under which policy adoption becomes optimal. Second, the interaction be tween natural capital stock volatility and the inference process gives rise to new effects that are absent under perfect information. Specifically, the impact of increased volatility on the conditions for optimal policy adoption varies depending on the information set. My work contributes to both the environmental policy timing literature and the field of resource man agement under incomplete information.

Suggested Citation

  • Pablo Garcia, 2024. "Optimal timing of environmental policy under partial information," BCL working papers 180, Central Bank of Luxembourg.
  • Handle: RePEc:bcl:bclwop:bclwp180
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    References listed on IDEAS

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    More about this item

    Keywords

    Natural capital; Partial information; Optimal stopping.;
    All these keywords.

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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