Optimal Investment in Clean Production Capacity
For the mitigation of long-term pollution threats, one must consider that both the process of environmental degradation and the switchover to new and cleaner technologies are dynamic. We develop a model of a uniform good that can be produced by either a polluting technology or a clean one; the latter is more expensive and requires investment in capacity. We derive the socially optimal pollution stock accumulation and creation of nonpolluting production capacity, weighing the tradeoffs among consumption, investment and djustment costs, and environmental damages. We consider the effects of changes in the pollution decay rate, the capacity depreciation rate, and the initial state of the environment on both the steady state and the transition period. The optimal transition path looks quite different with a clean or dirty initial environment. With the former, investment is slow and the price of pollution may overshoot the long-run optimum before converging. With the latter, capacity may overshoot. Copyright Kluwer Academic Publishers 2004
Volume (Year): 28 (2004)
Issue (Month): 3 (July)
|Contact details of provider:|| Web page: http://www.springer.com|
Postal:c/o EAERE Secretariat - Fondazione Eni Enrico Mattei - Isola di San Giorgio Maggiore 8, I-30124 Venice, Italy
Web page: http://www.eaere.org/
More information through EDIRC
|Order Information:||Web: http://www.springer.com/economics/environmental/journal/10640/PS2|
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.:
- Shmuel S. Oren & Stephen G. Powell, 1985. "Optimal Supply of a Depletable Resource with a Backstop Technology: Heal's Theorem Revisited," Operations Research, INFORMS, vol. 33(2), pages 277-292, April.
- LÃ©onard,Daniel & Long,Ngo van, 1992.
"Optimal Control Theory and Static Optimization in Economics,"
Cambridge University Press, number 9780521331586, Diciembre.
- LÃ©onard,Daniel & Long,Ngo van, 1992. "Optimal Control Theory and Static Optimization in Economics," Cambridge Books, Cambridge University Press, number 9780521337465, Diciembre.
- Ulph, Alistair & Ulph, David, 1997. "Global Warming, Irreversibility and Learning," Economic Journal, Royal Economic Society, vol. 107(442), pages 636-650, May.
- Franz Wirl & Cees Withagen, 2000. "Complexities due to sluggish expansion of backstop technologies," Journal of Economics, Springer, vol. 72(2), pages 153-174, June.
- Toman, Michael A. & Withagen, Cees, 2000. "Accumulative pollution, "clean technology," and policy design," Resource and Energy Economics, Elsevier, vol. 22(4), pages 367-384, October.
- Toman, Michael & Withagen, Cees, 1998. "Accumulative Pollution, "Clean Technology," and Policy Design," Discussion Papers dp-98-43, Resources For the Future.
- Kolstad, Charles D., 1996. "Fundamental irreversibilities in stock externalities," Journal of Public Economics, Elsevier, vol. 60(2), pages 221-233, May.
- Feichtinger, Gustav & Novak, Andreas & Wirl, Franz, 1994. "Limit cycles in intertemporal adjustment models : Theory and applications," Journal of Economic Dynamics and Control, Elsevier, vol. 18(2), pages 353-380, March.
- Philippe Michel & Gilles Rotillon, 1995. "Disutility of pollution and endogenous growth," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 6(3), pages 279-300, October. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:kap:enreec:v:28:y:2004:i:3:p:325-345. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.