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Pollution control under a possible future shift in environmental preferences

Listed author(s):
  • Nkuiya, Bruno
  • Costello, Christopher
Registered author(s):

    We examine how the possibility of a future shift in environmental preferences affects optimal pollution emissions. For example, is a more stringent carbon cap called for if excessive carbon emissions today may trigger a shift toward greener preferences in the future? In contrast to the related literature, which largely focuses on regime shifts in damages, not preferences, we find that the possibility of a shift in environmental preferences can induce higher, or lower, optimal current emissions. This hinges on an economically interesting interplay between the magnitude of the possible shift, whether the shift is endogenous, and the magnitude of environmental damages. This helps reconcile the tension between the conservationists’ view of pollution reduction (to reduce damage and lessen the likelihood of regime shift) and the traditional economic rationale emphasizing risk and discounting.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0167268116301007
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    Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

    Volume (Year): 132 (2016)
    Issue (Month): PB ()
    Pages: 193-205

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    Handle: RePEc:eee:jeborg:v:132:y:2016:i:pb:p:193-205
    DOI: 10.1016/j.jebo.2016.05.021
    Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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    1. Polasky, Stephen & de Zeeuw, Aart & Wagener, Florian, 2011. "Optimal management with potential regime shifts," Journal of Environmental Economics and Management, Elsevier, vol. 62(2), pages 229-240, September.
    2. Tsur, Yacov & Zemel, Amos, 1998. "Pollution control in an uncertain environment," Journal of Economic Dynamics and Control, Elsevier, vol. 22(6), pages 967-975, June.
    3. Brozovic, Nicholas & Schlenker, Wolfram, 2011. "Optimal management of an ecosystem with an unknown threshold," Ecological Economics, Elsevier, vol. 70(4), pages 627-640, February.
    4. Karp, Larry, 2005. "Global warming and hyperbolic discounting," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 261-282, February.
    5. Bruno Nkuiya & Walid Marrouch & Eric Bahel, 2015. "International Environmental Agreements under Endogenous Uncertainty," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(5), pages 752-772, October.
    6. Alain Le Kama & Katheline Schubert, 2004. "Growth, Environment and Uncertain Future Preferences," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 28(1), pages 31-53, May.
    7. Ren, Bijie & Polasky, Stephen, 2014. "The optimal management of renewable resources under the risk of potential regime shift," Journal of Economic Dynamics and Control, Elsevier, vol. 40(C), pages 195-212.
    8. Nkuiya, Bruno, 2015. "Transboundary pollution game with potential shift in damages," Journal of Environmental Economics and Management, Elsevier, vol. 72(C), pages 1-14.
    9. Alain Ayong Le Kama, 2001. "Preservation and exogenous uncertain future preferences," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 18(3), pages 745-752.
    10. Gjerde, Jon & Grepperud, Sverre & Kverndokk, Snorre, 1999. "Optimal climate policy under the possibility of a catastrophe," Resource and Energy Economics, Elsevier, vol. 21(3-4), pages 289-317, August.
    11. Benchekroun, Hassan & Ray Chaudhuri, Amrita, 2014. "Transboundary pollution and clean technologies," Resource and Energy Economics, Elsevier, vol. 36(2), pages 601-619.
    12. Frederick Ploeg & Aart Zeeuw, 1992. "International aspects of pollution control," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 2(2), pages 117-139, March.
    13. de Zeeuw, Aart & Zemel, Amos, 2012. "Regime shifts and uncertainty in pollution control," Journal of Economic Dynamics and Control, Elsevier, vol. 36(7), pages 939-950.
    14. Tsur, Yacov & Zemel, Amos, 1996. "Accounting for global warming risks: Resource management under event uncertainty," Journal of Economic Dynamics and Control, Elsevier, vol. 20(6-7), pages 1289-1305.
    15. Chichilnisky, Graciela & Beltratti, Andrea & Heal, Geoffrey, 1998. "Uncertain future preferences and conservation," MPRA Paper 7912, University Library of Munich, Germany.
    16. Dockner Engelbert J. & Van Long Ngo, 1993. "International Pollution Control: Cooperative versus Noncooperative Strategies," Journal of Environmental Economics and Management, Elsevier, vol. 25(1), pages 13-29, July.
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