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Optimal growth with pollution : how to use pollution permits ?

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Author Info
Pierre-André Jouvet (GAINS et GREQAM)
Philippe Michel (GREQAM et EUREQua)
Gilles Rotillon (THEMA)

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Abstract

We study optimal growth and its decentralization in an overlapping generations model. The decentralization of an optimal path needs some specific taxes in addition to lump-sum transfers if there are externalities. The introduction of market of permits allows neutralizing the external environmental effects. We shows that there is a unique management of permits such that the equilibrium coincides with the optimal path : all permits should be auctioned i.e. no permits to firms. This conclusion is in contradiction with the usual pratice of grandfathering.

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File URL: ftp://mse.univ-paris1.fr/pub/mse/cahiers2004/V04012.pdf
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Publisher Info
Paper provided by Université Panthéon-Sorbonne (Paris 1) in its series Cahiers de la Maison des Sciences Economiques with number v04012.

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Length: 21 pages
Date of creation: Feb 2004
Date of revision:
Handle: RePEc:mse:wpsorb:v04012

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Related research
Keywords: Optimal growth; environment; market of permits.;

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Find related papers by JEL classification:
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

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Rubin, Jonathan D., 1996. "A Model of Intertemporal Emission Trading, Banking, and Borrowing," Journal of Environmental Economics and Management, Elsevier, vol. 31(3), pages 269-286, November. [Downloadable!] (restricted)
  2. Forster, Bruce A., 1980. "Optimal energy use in a polluted environment," Journal of Environmental Economics and Management, Elsevier, vol. 7(4), pages 321-333, December. [Downloadable!] (restricted)
  3. Stokey, Nancy L, 1998. "Are There Limits to Growth?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 1-31, February.
  4. Ger Klaassen & David Pearce, 1995. "Introduction," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 5(2), pages 85-93, March. [Downloadable!] (restricted)
  5. Tetsuo Ono, 2002. "The Effects of Emission Permits on Growth and the Environment," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 21(1), pages 75-87, January. [Downloadable!] (restricted)
    Other versions:
  6. Smith, Vernon L, 1972. "Dynamics of Waste Accumulation: Disposal Versus Recycling," The Quarterly Journal of Economics, MIT Press, vol. 86(4), pages 600-616, November. [Downloadable!] (restricted)
  7. Asako, Kazumi, 1980. "Economic growth and environmental pollution under the max-min principle," Journal of Environmental Economics and Management, Elsevier, vol. 7(3), pages 157-183, September. [Downloadable!] (restricted)
  8. Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December. [Downloadable!] (restricted)
  9. Frederick Ploeg & Cees Withagen, 1991. "Pollution control and the Ramsey problem," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 1(2), pages 215-236, June. [Downloadable!] (restricted)
  10. Keeler, Emmett & Spence, Michael & Zeckhauser, Richard, 1972. "The optimal control of pollution," Journal of Economic Theory, Elsevier, vol. 4(1), pages 19-34, February. [Downloadable!] (restricted)
  11. Cronshaw, Mark B & Brown-Kruse, Jamie, 1996. "Regulated Firms in Pollution Permit Markets with Banking," Journal of Regulatory Economics, Springer, vol. 9(2), pages 179-89, March.
  12. Jouvet, Pierre-Andre & Michel, Philippe & Vidal, Jean-Pierre, 2000. " Intergenerational Altruism and the Environment," Scandinavian Journal of Economics, Blackwell Publishing, vol. 102(1), pages 135-50, March. [Downloadable!] (restricted)
    Other versions:
  13. Stevens, Brandt & Rose, Adam, 2002. "A Dynamic Analysis of the Marketable Permits Approach to Global Warming Policy: A Comparison of Spatial and Temporal Flexibility," Journal of Environmental Economics and Management, Elsevier, vol. 44(1), pages 45-69, July. [Downloadable!] (restricted)
  14. Tahvonen, Olli & Kuuluvainen, Jari, 1991. "Optimal growth with renewable resources and pollution," European Economic Review, Elsevier, vol. 35(2-3), pages 650-661, April. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. LAMBRECHT, StŽphane, 2005. "Maintaining environmental quality for overlapping generations: Some reflections on the US sky trust initiative," CORE Discussion Papers 2005074, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
  2. Julien Pierre Chevallier, 2007. "A differential game of intertemporal emissions trading with market power," EconomiX Working Papers 2007-18, University of Paris West - Nanterre la Défense, EconomiX. [Downloadable!]
  3. Julien Chevallier, 2009. "Intertemporal Emissions Trading and Allocation Rules: Gainers, Losers and the Spectre of Market Power," Working Papers halshs-00124713_v1, HAL. [Downloadable!]
  4. Thierry Bréchet & Pierre-André Jouvet, 2006. "Why environmental regulation may lead to no-regret pollution abatement?," EconomiX Working Papers 2006-12, University of Paris West - Nanterre la Défense, EconomiX. [Downloadable!]
  5. Pierre-André Jouvet & Fabien Prieur, 2006. "Permis de pollution et contraintes politiques dans un modèle à générations imbriquées," EconomiX Working Papers 2006-21, University of Paris West - Nanterre la Défense, EconomiX. [Downloadable!]
  6. BRECHET, Thierry & LAMBRECHT, StŽphane & PRIEUR, Fabien, 2005. "Intergenerational transfers of pollution rights and growth," CORE Discussion Papers 2005042, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
  7. Julien Chevallier, 2009. "Emissions Trading: What Makes It Work?," Working Papers halshs-00401725_v1, HAL. [Downloadable!]
  8. Pierre-André Jouvet & Philippe Michel & Gilles Rotillon, 2006. "Optimal growth in overlapping generations with a directly polluting sector and an indirect one," EconomiX Working Papers 2006-1, University of Paris West - Nanterre la Défense, EconomiX. [Downloadable!]
  9. Julien Chevallier, 2009. "Intertemporal Emissions Trading and Market Power: A Dominant Firm with Competitive Fringe Model," Working Papers halshs-00388207_v1, HAL. [Downloadable!]
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