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Optimal pollution control under emission constraitns: switching between regimes

Author

Listed:
  • Enrico Saltari

    (Department of Economics and Law, Università "La Sapienza" Roma)

  • Giuseppe Travaglini

    (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo")

Abstract

In this paper we develop a model of pollution control which maximizes the present value of net social benefits. We show that the presence of an upper constraint on emissions affects the pollution control even when emissions are far below the level where the constraint binds. We get three main results. First, we find that for a society it is optimal to take into account the impact of the latent constraint at the outset and to modify the flow of emissions even when the constraint is still slack. Second, we analyze how the restriction works effectively in the intermediate phases before the constraint binds, comparing the unconstrained and constrained scenarios. Finally, we state the boundary conditions to compute the optimal trajectory of emissions switching between regimes. This trajectory cannot be obtained by simply pasting together the unconstrained and the constrained parts of the trajectories.

Suggested Citation

  • Enrico Saltari & Giuseppe Travaglini, 2013. "Optimal pollution control under emission constraitns: switching between regimes," Working Papers 1302, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2013.
  • Handle: RePEc:urb:wpaper:13_02
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    File URL: http://www.econ.uniurb.it/RePEc/urb/wpaper/WP_13_02.pdf
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    More about this item

    Keywords

    Pollution control; inequality constraints; net social benefits;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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