Document Detail

Future sustainability forecasting by exchange markets: basic theory and an application.
MedLine Citation:
PMID:  21058697     Owner:  NLM     Status:  In-Process    
Setting sustainability targets and evaluating systems progress are of great importance nowadays due to threats to the human society, to economic development and to ecosystems, posed by unsustainable human activities. This research establishes a probabilistic theoretical approach based on market expectations reflected in prices of publicly traded securities to estimate the time horizon until the appearance of new technologies related to replacement of nonrenewable resources, for example, crude oil and oil products. To assess time T when technological innovations are likely to appear, we apply advanced pricing equations, based on a stochastic discount factor to those traded securities whose future cash flows critically depend on appearance of such innovations. In a simple approximation of the proposed approach applied to replacement of crude oil and oil products, we obtain T ≈ (P(0)(oil)/C(0))·ln (Δ·P(0)(oil)/P(0)(alt)), where P(0)(oil) and P(0)(alt) are the current aggregate market capitalizations of oil and alternative-energy companies, C(0) is the annual aggregate dividends that oil companies pay to their shareholders at the present, and Δ is the fraction of the oil (oil products) replaced at time T. This formula gives T ≈ 131 years for replacement of gasoline and diesel. The proposed market-expectations approach may allow policymakers to effectively develop policies and plan for long-term changes.
Nataliya Malyshkina; Deb Niemeier
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Publication Detail:
Type:  Journal Article     Date:  2010-11-08
Journal Detail:
Title:  Environmental science & technology     Volume:  44     ISSN:  1520-5851     ISO Abbreviation:  Environ. Sci. Technol.     Publication Date:  2010 Dec 
Date Detail:
Created Date:  2010-11-29     Completed Date:  -     Revised Date:  -    
Medline Journal Info:
Nlm Unique ID:  0213155     Medline TA:  Environ Sci Technol     Country:  United States    
Other Details:
Languages:  eng     Pagination:  9134-42     Citation Subset:  IM    
University of California, Davis, The Department of Civil and Environmental Engineering, One Shields Avenue, Davis, California 95616, United States.
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