No abstract

No abstract

A new direction for evaluating pollution policy is proposed, focused on optimal investment pathways for mitigation capital. The approach allows practitioners to draw directly from key principles in the diffusion literature. A two‐stage, policy‐development framework is introduced. The first stage consists of empirical modelling to assess optimal diffusion pathways for diverse mitigation options. The second involves determining the relative strengths of different policy actions to address diffusion rates or maximum levels of adoption that diverge from optimal levels. The advantages of this new approach are demonstrated in an agri‐environmental context, concerning the off‐site impacts of intensive agriculture on water quality. The viewpoint provided by the novel approach establishes the importance of adoptability – alongside the traditional measures of abatement effectiveness and cost – for mitigation practices in policy assessment. The key role that durable mitigation capital plays in addressing dynamic externalities is demonstrated, alongside the importance of structured diffusion cascades for alternate mitigation options.

This paper is an extension of work I started as part of my Honours degree in Victoria University of Wellington's economics department. I would like to thank my supervisor, Dean Hyslop, for the time and thought he has put into guiding me. I would like to thank Mohammed Khaled for his useful comments on my Honours paper. A huge thanks to Motu Research for providing me with data, support, and funding for this working paper, particularly to Suzi Kerr. I would also like to acknowledge my wife Raven, for going far above and beyond in supporting me during the difficult Honours year, and my family for helping me through. This work has been partly supported by Motu Economics and Public Policy Research through the "Climate Impacts and Implications" research programme funded by the NZ Ministry of Business, Innovation and Employment.