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    Uncertainty, Learning, and Local Opposition to Hydraulic Fracturing2018

    CUTLER H., HESS J.H., IVERSON T., MANNING D.T.Journaux et Revues (scientifiques)

    épuisement des ressources, valeur d'option

    Resource and Energy Economics
    Available online 16 November 2018

    Highlights
    • A dynamic programming model quantifies a locality-wide quasi-option value for resource policy

    • The numerical model is calibrated to a community considering hydraulic fracturing

    • Learning about the true magnitude of fracking damages can influence local policymaking


    Abstract
    New extraction technologies, including hydraulic fracturing (fracking), have increased fossil fuel reserves in the United States. Despite local economic benefits, many jurisdictions have adopted bans on fracking. We develop a dynamic learning model parameterized with a computable general equilibrium (CGE) model to quantify the associated quasi-option value (QOV), and to explore if uncertainty about environmental damages with the potential to learn can rationalize such bans. The model is calibrated to a representative municipality in Colorado, the site of several fracking bans. With plausible damages, we find that the QOV increases the incentive to delay drilling within a range of energy prices. The results suggest that improving the ability to learn about fracking impacts could increase the prevalence of bans in the short run and lead to better policymaking over time. Incorporating CGE output into a dynamic learning framework permits calculation of the locality-wide QOV associated with a range of policies.

    https://doi.org/10.1016/j.reseneeco.2018.11.001

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