| Effective environmental quality control, which is achieved through the enforcement of pollution level standards, is hindered by various types of uncertainty. In this study, the following four elements of uncertainty enter the analysis: (1) uncertainty in the achievement of a given set of environmental quality goals (2) uncertainty in the measurement of emissions and pollution levels (3) uncertainty about the form and parameter values of the dispersion relationships and (4) uncertainty about the prices in the output/input markets. The objective of this research is to explore, in the context of a set of stochastic control problems, the implications of the above elements of uncertainty for emission, price information gathering and measurement of emission and concentration controls as well as the rates of information acquisition about the unknown parameters of the dispersion relationships.Several conclusions are drawn from this study: (1) when the transfer function parameters of the environmental system are unknown, and thus have to be estimated, the effluent charge required for efficiency depends not only upon the estimates of the diffusion coefficients, but also upon the uncertainty (variance-covariance matrix) of the (estimated) parameters (2) in the case of a risk adverse planner and risk neutral polluters, efficiency requires the imposition of an input tax as a means of internalizing risk costs and (3) under the assumptions specified in Chapter V, the Separation Theorem shows that the optimal environmental controls are three way separable in the sense that the optimal conditions may be stated in terms of three problems: the first, a multi-period stochastic control problem is concerned with the simultaneous choice of emission and price information gathering controls, the second, a nonlinear deterministic control problem, with the optimal pollution level measurement controls, and the third with the optimal emission rate measurement controls.More precisely, this study has three main objectives. The first objective is to present a new stochastic externality control framework under the assumption of imperfect information about the output/input prices, the environmental quality standards, the physical model parameters, uncontrollable exogenous influences and imprecise measurements of emission rates and pollution levels. The second objective is to provide implementable stochastic and adaptive control schedules for the determination of single period as well as multiperiod environmental control strategies. |
