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Growth And Irreversible Pollution: Are Emission Permits A Means Of Avoiding Environmental And Poverty Traps?

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  • Prieur, Fabien
  • Jean-Marie, Alain
  • Tidball, Mabel

Abstract

We consider an OLG model with emissions arising from production and potentially irreversible pollution. Pollution control consists of the assignment of permits to firms; private agents also can abate pollution. In this setting, we prove that multiple equilibria exist. Due to the possible irreversibility of pollution, the economy can be dragged into both environmental and poverty traps. First, we show that choosing an emission quota at the lowest level beyond a critical threshold is a means to avoid these two types of traps. We also prove that when the agents do not engage in maintenance, a reduction of the quota leads to a reduction in pollution but also to slower capital accumulation. In contrast, when agents do engage in maintenance, a reduction of the quota provides a double dividend.
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  • Prieur, Fabien & Jean-Marie, Alain & Tidball, Mabel, 2013. "Growth And Irreversible Pollution: Are Emission Permits A Means Of Avoiding Environmental And Poverty Traps?," Macroeconomic Dynamics, Cambridge University Press, vol. 17(02), pages 261-293, March.
  • Handle: RePEc:cup:macdyn:v:17:y:2013:i:02:p:261-293_00
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    Cited by:

    1. Hiroshi Danbara, 2013. "Environmental Externality on Production in an OLG Economy," Keio/Kyoto Joint Global COE Discussion Paper Series 2012-045, Keio/Kyoto Joint Global COE Program.
    2. Golub, Alexander & Toman, Michael, 2014. "Climate change, industrial transformation, and"development traps"," Policy Research Working Paper Series 6951, The World Bank.
    3. Alexander Golub & Michael Toman, 2016. "Climate Change, Industrial Transformation, and “Environmental Growth Traps”," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 63(2), pages 249-263, February.

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