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

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  • BRECHET, Thierry
  • JOUVET, Pierre-André
  • ROTILLON, Gilles

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://dx.doi.org/10.1016/j.ecolecon.2013.04.004
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers RP with number -2478.

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Handle: RePEc:cor:louvrp:-2478

Note: In : Ecological Economics, 91, 89-97, 2013
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  1. 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).
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  1. 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.

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