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Tradable pollution permits in dynamic general equilibrium: can optimality and acceptability be reconciled?

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  • Thierry Bréchet

    ()
    (Université catholique de Louvain, CORE and Chair Lhoist Berghmans in Environmental Economics and Management)

  • Pierre-André Jouvet

    (EconomiX, Univ. Paris Ouest, Nanterre - La Défense, Climate Economics Chair, Paris)

  • Gilles Rotillon

    (EconomiX, Univ. Paris Ouest, Nanterre - La Défense.)

Abstract

In this paper we study the optimal growth path and its decentralization in a twosector overlapping-generations model with pollution. One sector (power generation) is polluting and the other (final good) is not. Pollution is regulated by tradable emission permits. The issue is whether the optimal growth path can be replicated in equilibrium with pollution permits, given that some permits must be issued free of charge for the sake of political acceptability. We provide a policy rule that allows optimality and acceptability to be reconciled.

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File URL: http://cec-repec.site11.com/RePEc/cec/wpaper/11-02_WP_2011-02_Brechet_Jouvet_Rotillon.pdf
File Function: First version, 2011
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Bibliographic Info

Paper provided by Chaire Economie du Climat in its series Working Papers with number 1102.

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Length: 30 pages
Date of creation: Feb 2011
Date of revision:
Handle: RePEc:cec:wpaper:1102

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Related research

Keywords: general equilibrium; optimal growth; pollution; tradable emission permits; acceptability;

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  1. BRECHET, Thierry & JOUVET, Pierre-André & ROTILLON, Gilles, . "Tradable pollution permits in dynamic general equilibrium: can optimality and acceptability be reconciled?," CORE Discussion Papers RP -2478, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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Cited by:
  1. BRECHET, Thierry & JOUVET, Pierre-André & ROTILLON, Gilles, . "Tradable pollution permits in dynamic general equilibrium: can optimality and acceptability be reconciled?," CORE Discussion Papers RP -2478, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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