Tradable pollution permits in dynamic general equilibrium: can optimality and acceptability be reconciled?
AbstractIn 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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Bibliographic InfoPaper provided by Chaire Economie du Climat in its series Working Papers with number 1102.
Length: 30 pages
Date of creation: Feb 2011
Date of revision:
general equilibrium; optimal growth; pollution; tradable emission permits; acceptability;
Other versions of this item:
- BRECHET, Thierry & JOUVET, Pierre - André & ROTILLON, Gilles, 2010. "Tradable pollution permits in dynamic general equilibrium: can optimality and acceptability be reconciled?," CORE Discussion Papers 2010056, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- D9 - Microeconomics - - Intertemporal Choice and Growth
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-12-19 (All new papers)
- NEP-DGE-2011-12-19 (Dynamic General Equilibrium)
- NEP-ENE-2011-12-19 (Energy Economics)
- NEP-ENV-2011-12-19 (Environmental Economics)
- NEP-RES-2011-12-19 (Resource Economics)
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