In response to some good comments on the trigger price post I've added a ten year wait between drilling prep and actual drilling (with discounting this reduces the future profits and future costs to those who would have enjoyed the caribou) and calculated the trigger price/willingness to pay combo with a 2% discount rate (which makes the future more valuable than with a 10% discount rate).
First, a summary of terms:
- Trigger price - the price at which it becomes a good idea to drill ANWR; if the market price rises above the trigger price then the oil companies are making money above their costs of production and would be able to compensate all those who like caribou.
- Willingness to pay star (WTP*) - the household value below which it is a good idea to drill ANWR; if the actual household value of preserving ANWR is below WTP* then people don't care enough about caribou to compensate the oil companies for their lost profits.
Trigger prices rise by about $6 when the net market benefits of oil start coming in after 10 years of setup (with a 10% discount rate). When WTP* is between $2-$3 the trigger price is between $26 and $30. When WTP* is $35 the trigger price is greater than $75. When the trigger price is $60, WTP* must be $15/year to make preservation the recommended option.
When the discount rate is 2% (and oil starts flowing after 10 years) the trigger price at each WTP* is lower. When WTP* is between $2-$3 the trigger price is between $19 and $21. When WTP* is $35 the trigger price is $75. When the trigger price is $60, WTP* must be $26/year to make preservation the recommended option. Here is the full table:
| Trigger Price | WTP* | WTP*(r=2%) |
| $15 | ||
| $16 | $0 | |
| $17 | $1 | |
| $18 | $1 | |
| $19 | $2 | |
| $20 | $2 | |
| $21 | $3 | |
| $22 | $0 | $4 |
| $23 | $0 | $4 |
| $24 | $1 | $5 |
| $25 | $1 | $5 |
| $26 | $2 | $6 |
| $27 | $2 | $7 |
| $28 | $2 | $7 |
| $29 | $3 | $8 |
| $30 | $3 | $8 |
| $31 | $4 | $9 |
| $32 | $4 | $10 |
| $33 | $4 | $10 |
| $34 | $5 | $11 |
| $35 | $5 | $11 |
| $36 | $5 | $12 |
| $37 | $6 | $12 |
| $38 | $6 | $13 |
| $39 | $7 | $14 |
| $40 | $7 | $14 |
| $41 | $7 | $15 |
| $42 | $8 | $15 |
| $43 | $8 | $16 |
| $44 | $9 | $17 |
| $45 | $9 | $17 |
| $46 | $9 | $18 |
| $47 | $10 | $18 |
| $48 | $10 | $19 |
| $49 | $10 | $20 |
| $50 | $11 | $20 |
| $51 | $11 | $21 |
| $52 | $12 | $21 |
| $53 | $12 | $22 |
| $54 | $12 | $23 |
| $55 | $13 | $23 |
| $56 | $13 | $24 |
| $57 | $14 | $24 |
| $58 | $14 | $25 |
| $59 | $14 | $26 |
| $60 | $15 | $26 |
| $61 | $15 | $27 |
| $62 | $15 | $27 |
| $63 | $16 | $28 |
| $64 | $16 | $29 |
| $65 | $17 | $29 |
| $66 | $17 | $30 |
| $67 | $17 | $30 |
| $68 | $18 | $31 |
| $69 | $18 | $32 |
| $70 | $19 | $32 |
| $71 | $19 | $33 |
| $72 | $19 | $33 |
| $73 | $20 | $34 |
| $74 | $20 | $34 |
| $75 | $20 | $35 |
Spreadsheet: ANWR-SIM.xls
