Optimal emission policy under the risk of irreversible pollution

Abstract : 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.
Document type :
Journal articles
Liste complète des métadonnées

Cited literature [25 references]  Display  Hide  Download

http://hal.univ-grenoble-alpes.fr/hal-01280775
Contributor : Gersende Gatellet <>
Submitted on : Friday, March 4, 2016 - 2:01:36 PM
Last modification on : Wednesday, July 4, 2018 - 11:14:10 PM
Document(s) archivé(s) le : Sunday, June 5, 2016 - 10:10:26 AM

File

JPET_Pommeret.pdf
Files produced by the author(s)

Identifiers

  • HAL Id : hal-01280775, version 1

Citation

Alain Ayong Le Kama, Aude Pommeret, Fabien Prieur. Optimal emission policy under the risk of irreversible pollution . Journal of Public Economic Theory, Wiley, 2014, 16 (6), pp.959-980. ⟨hal-01280775⟩

Share

Metrics

Record views

324

Files downloads

163