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 two-sector 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 Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2010056.
Date of creation: 01 Oct 2010
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general equilibrium; optimal growth; pollution; tradable emission permits; acceptability;
Other versions of this item:
- Bréchet, Thierry & Jouvet, Pierre-André & Rotillon, Gilles, 2013. "Tradable pollution permits in dynamic general equilibrium: Can optimality and acceptability be reconciled?," Ecological Economics, Elsevier, vol. 91(C), pages 89-97.
- Thierry Bréchet & Pierre-André Jouvet & Gilles Rotillon, 2011. "Tradable pollution permits in dynamic general equilibrium: can optimality and acceptability be reconciled?," Working Papers 1102, Chaire Economie du Climat.
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- D9 - Microeconomics - - Intertemporal Choice
- 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-2011-02-12 (All new papers)
- NEP-DGE-2011-02-12 (Dynamic General Equilibrium)
- NEP-ENE-2011-02-12 (Energy Economics)
- NEP-ENV-2011-02-12 (Environmental Economics)
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