Valuation of natural capital under uncertain substitutability

Gollier, Christian (2017) Valuation of natural capital under uncertain substitutability. TSE Working Paper, n. 17-813, Toulouse

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Official URL: http://tse-fr.eu/pub/31743


Natural capital is complex to price notably because of the high uncertainties surrounding the substitutability of its future ecosystem services. We examine a two-tree Lucas economy where both the economic growth and the degree of substitutability are uncertain. We show that the uncertain substitutability raises the expected value of the service and the rate at which it should be discounted. The value effect dominates the discounting effect, so the economic value of natural capital is increased. When the prior beliefs about substitutability are Gaussian, the economic value of future ecosystem services goes to infinity for finite maturities.

Item Type: Monograph (Working Paper)
Language: English
Date: May 2017
Place of Publication: Toulouse
Uncontrolled Keywords: Asset pricing, CCAPM beta, discounting, bioeconomics
JEL codes: G12 - Asset Pricing; Trading volume; Bond Interest Rates
Q01 - Sustainable Development
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 18 May 2017 12:14
Last Modified: 06 Jun 2019 08:25
OAI ID: oai:tse-fr.eu:31743
URI: http://publications.ut-capitole.fr/id/eprint/24094

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