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EKC-type transitions and environmental policy under pollutant uncertainty and cost irreversibility

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  • Kijima, Masaaki
  • Nishide, Katsumasa
  • Ohyama, Atsuyuki

Abstract

Previous studies have suggested that some pollutant levels first increases due to the economic growth and then start decreasing, the pattern being called the "environmental Kuznets curve" (EKC). We examine EKC-type transitions of pollutant levels not with respect to economic growth but more generally in time. Assuming that each policy maker optimally executes the two switching options of regulation and unregulation for pollution, the switching dynamics of environmental policy can be described by an alternating renewal process. It is shown that the double Laplace transform of transition density of a pollutant level can be obtained by a novel application of renewal theory. The expected level of overall pollutants is then calculated numerically and found to exhibit either a [Lambda][hyphen (true graphic)]shaped or an N-shaped pattern in time. Our results present a simple explanation for the EKC-type transitions of pollutant levels within a real options framework.

Suggested Citation

  • Kijima, Masaaki & Nishide, Katsumasa & Ohyama, Atsuyuki, 2011. "EKC-type transitions and environmental policy under pollutant uncertainty and cost irreversibility," Journal of Economic Dynamics and Control, Elsevier, vol. 35(5), pages 746-763, May.
  • Handle: RePEc:eee:dyncon:v:35:y:2011:i:5:p:746-763
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    6. Paul Evans & Ji Uk Kim, 2016. "Convergence analysis as spatial dynamic panel regression and distribution dynamics of $$\hbox {CO}_{2}$$ CO 2 emissions in Asian countries," Empirical Economics, Springer, vol. 50(3), pages 729-751, May.
    7. Ibrahima Amadou Diallo, 2019. "The Environmental Kuznets Curve in a Public Spending Model of Economic Growth," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 44(4), pages 69-96, December.
    8. Simone Marsiglio & Davide Torre, 2018. "Economic growth and abatement activities in a stochastic environment: a multi-objective approach," Annals of Operations Research, Springer, vol. 267(1), pages 321-334, August.
    9. Wei Wei & Chenggong Jin & Ying Han & Zhenhui Huang & Tong Niu & Jinkai Li, 2022. "The Coordinated Development and Regulation Research on Public Health, Ecological Environment and Economic Development: Evidence from the Yellow River Basin of China," IJERPH, MDPI, vol. 19(11), pages 1-23, June.
    10. Kijima, Masaaki & Nishide, Katsumasa & Ohyama, Atsuyuki, 2010. "Economic models for the environmental Kuznets curve: A survey," Journal of Economic Dynamics and Control, Elsevier, vol. 34(7), pages 1187-1201, July.
    11. Davide Torre & Danilo Liuzzi & Simone Marsiglio, 2017. "Pollution Control Under Uncertainty and Sustainability Concern," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(4), pages 885-903, August.
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