Exploring the optimality of cyclical emission rates
AbstractIn this paper, one of the basic assumptions is that the environment provides two different kinds of services. First, the environment may serve as an input to the production of conventional goods. For example, the exploitation of an oil source from which one firm extracts the oil which in turn is used as a fossil fuel for an industry. In the worst case, the use of the environment for industrial purposes will negatively affect the environment, e.g. the water quality of a paper mill along a river. Nevertheless, the possibility to pollute, i.e., to save abatement costs, lowers production costs. Hence, firms and consumers evaluate this service positively. Second, the environment itself-clean air, natural creeks and rivers instead of paper mills, hydro power plants, etc.-provides amenities and thus a second service that is different, because enjoying this service does not degrade environmental quality. As it is intuitively clear, the environment provides consumptive and non-consumptive uses. In renewable resources means, the environmental stock may be harvested and used as an input for conventional goodsÃƒÂ¢Ã¯Â¿Â½Ã¯Â¿Â½ production but provides simultaneously a positive externality. The purpose of this paper is to study the dynamics of pollution and the possibility of cycles and instability, while the major findings of this paper are the following: First, taking the simplest pollution model with one state and one control variables and extending it into two state variables, equilibrium may change from the fixed point into a limit cycle equilibrium, i.e. the optimal emissions rate may be cyclical. Second, taking the conflicting case as a differential game we found again the conditions under which the richer limit cycle equilibrium takes place.
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Bibliographic InfoPaper provided by Athens University of Economics and Business in its series DEOS Working Papers with number 1404.
Date of creation: 01 Apr 2014
Date of revision:
Renewable resources; environmental economics; pollution management;
Other versions of this item:
- Halkos, George & Papageorgiou, George, 2014. "Exploring the optimality of cyclical emission rates," MPRA Paper 54915, University Library of Munich, Germany.
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-04-11 (All new papers)
- NEP-ENE-2014-04-11 (Energy Economics)
- NEP-ENV-2014-04-11 (Environmental Economics)
- NEP-GER-2014-04-11 (German Papers)
- NEP-RES-2014-04-11 (Resource Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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