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A dynamic programming approach to optimal pollution control under uncertain irreversibility: The Poisson case

Author

Listed:
  • Raouf Boucekkine

    (Rennes School of Business, France)

  • Weihua Ruan

    (Department of Mathematics and Statistics, Purdue University Northwest, USA)

  • Benteng Zou

    (DEM, University of Luxembourg)

Abstract

We solve a bimodal optimal control problem with a non-concavity and uncertainty through a Poisson process underlying the transition from a mode to another. We use a dynamic programming approach and are able to uncover the global optimal dynamics (including optimal non-monotonic paths) under a few linear-quadratic assumptions, which do not get rid of the non-concavity of the problem. This is in contrast to the related literature on pollution control under irreversibility which usually explores local dynamics along monotonic solution paths to firstorder Pontryagin conditions.

Suggested Citation

  • Raouf Boucekkine & Weihua Ruan & Benteng Zou, 2022. "A dynamic programming approach to optimal pollution control under uncertain irreversibility: The Poisson case," LIDAM Discussion Papers IRES 2022017, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvir:2022017
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    File URL: https://sites.uclouvain.be/econ/DP/IRES/2022017.pdf
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    References listed on IDEAS

    as
    1. Raouf Boucekkine & Aude Pommeret & Fabien Prieur, 2013. "Technological vs. Ecological Switch and the Environmental Kuznets Curve," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(2), pages 252-260.
    2. Alain Ayong Le Kama & Aude Pommeret & Fabien Prieur, 2014. "Optimal Emission Policy under the Risk of Irreversible Pollution," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(6), pages 959-980, December.
    3. Alain Ayong Le Kama & Aude Pommeret & Fabien Prieur, 2014. "Optimal Emission Policy under the Risk of Irreversible Pollution," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(6), pages 959-980, December.
    4. Raouf Boucekkine & Aude Pommeret & Fabien Prieur, 2013. "Technological vs. Ecological Switch and the Environmental Kuznets Curve," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(2), pages 252-260.
    5. Tahvonen, Olli & Withagen, Cees, 1996. "Optimality of irreversible pollution accumulation," Journal of Economic Dynamics and Control, Elsevier, vol. 20(9-10), pages 1775-1795.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Multi-stage optimal control; Poisson process; HJB equations; irreversible pollution;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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