Optimal Emission Policy under the Risk of Irreversible Pollution

Ayong Le Kama, Alain, Pommeret, Aude and Prieur, Fabien (2014) Optimal Emission Policy under the Risk of Irreversible Pollution. Journal of Public Economic Theory, vol.16 (n°6). pp. 959-980.

Full text not available from this repository.
Official URL: http://tse-fr.eu/pub/30389


We consider an optimal consumption and pollution problem that has two important features. Environmental damages due to economic activities may be irreversible and the level at which the degradation becomes irreversible is unknown. Particular attention is paid to the situation where agents are relatively impatient and/or do not care a lot about the environment and/or Nature regenerates at low rate. We show that the optimal policy of the uncertain problem drives the economy in the long run toward a steady state while, when ignoring irreversibility, the economy follows a balanced growth path accompanied by a perpetual decrease in environmental quality and consumption, both asymptotically converging toward zero. Therefore, accounting for the risk of irreversibility induces more conservative decisions regarding consumption and polluting emissions. In general, however, we cannot rule out situations where the economy will optimally follow an irreversible path and consequently will also be left, in the long run, with an irreversibly degraded environment.

Item Type: Article
Language: English
Date: December 2014
Refereed: Yes
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 22 Apr 2016 07:41
Last Modified: 07 Mar 2018 13:23
OAI ID: oai:tse-fr.eu:30389
URI: http://publications.ut-capitole.fr/id/eprint/20669

Actions (login required)

View Item View Item