Application of a predictive Bayesian model to environmental accounting

Robert P. Anex, James D. Englehardt

Research output: Contribution to journalArticle

3 Scopus citations

Abstract

Environmental accounting techniques are intended to capture important environmental costs and benefits that are often overlooked in standard accounting practices. Environmental accounting methods themselves often ignore or inadequately represent large but highly uncertain environmental costs and costs conditioned by specific prior events. Use of a predictive Bayesian model is demonstrated for the assessment of such highly uncertain environmental and contingent costs. The predictive Bayesian approach presented generates probability distributions for the quantity of interest (rather than parameters thereof). A spreadsheet implementation of a previously proposed predictive Bayesian model, extended to represent contingent costs, is described and used to evaluate whether a firm should undertake an accelerated phase-out of its PCB containing transformers. Variability and uncertainty (due to lack of information) in transformer accident frequency and severity are assessed simultaneously using a combination of historical accident data, engineering model-based cost estimates, and subjective judgement. Model results are compared using several different risk measures. Use of the model for incorporation of environmental risk management into a company's overall risk management strategy is discussed.

Original languageEnglish (US)
Pages (from-to)99-112
Number of pages14
JournalJournal of Hazardous Materials
Volume82
Issue number2
DOIs
StatePublished - Mar 30 2001

Keywords

  • Bayesian statistics
  • Environmental accounting
  • Project evaluation
  • Risk assessment
  • Risk management

ASJC Scopus subject areas

  • Chemical Health and Safety
  • Process Chemistry and Technology
  • Safety, Risk, Reliability and Quality
  • Environmental Engineering

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