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Dynamics of pollution control when damage is sensitive to the rate of pollution accumulation

  • Olli Tahvonen

Economic models which take into account the long-term effects of pollution in the environment specify pollution damage as a function of the accumulated stock. Several economists have proposed another formulation where damage is a function of the time derivative of the pollution stock. This paper considers the intertemporal efficiency implications of this formulation. The first specification is qualitative and the objective functional includes both the rate of change and the level of the pollution stock. The second specification is a stylized climate change model with a linear damage function where damage depends only on the rate of increase in global temperature. The analysis reveals that the efficiency properties of optimal pollution control are very sensitive to this change in the damage function. Intertemporal efficiency may require higher emissions compared with the level which is optimal from the myopic point of view. An increase in the rate of discount typically reduces the optimal emission level. Copyright Kluwer Academic Publishers 1995

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File URL: http://hdl.handle.net/10.1007/BF00691907
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Article provided by European Association of Environmental and Resource Economists in its journal Environmental & Resource Economics.

Volume (Year): 5 (1995)
Issue (Month): 1 (January)
Pages: 9-27

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Handle: RePEc:kap:enreec:v:5:y:1995:i:1:p:9-27
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  1. William D. Nordhaus, 1992. "The 'DICE' Model: Background and Structure of a Dynamic Integrated Climate-Economy Model of the Economics of Global Warming," Cowles Foundation Discussion Papers 1009, Cowles Foundation for Research in Economics, Yale University.
  2. William R. Cline, 1992. "Economics of Global Warming, The," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 39, March.
  3. Conrad, Jon M. & Olson, Lars J., 1990. "The Economics Of A Stock Pollutant: Aldicarb On Long Island," Working Papers 6328, Cornell University, Department of Applied Economics and Management.
  4. Keeler, Emmett & Spence, Michael & Zeckhauser, Richard, 1972. "The optimal control of pollution," Journal of Economic Theory, Elsevier, vol. 4(1), pages 19-34, February.
  5. Stephen C Peck & Thomas J. Teisberg, 1992. "CETA: A Model for Carbon Emissions Trajectory Assessment," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 55-78.
  6. C. G. Plourde, 1972. "A Model of Waste Accumulation and Disposal," Canadian Journal of Economics, Canadian Economics Association, vol. 5(1), pages 119-25, February.
  7. Andrew Dean & Peter Hoeller, 1992. "Costs of Reducing CO2 Emissions: Evidence from Six Global Models," OECD Economics Department Working Papers 122, OECD Publishing.
  8. John M. Hartwick, 1990. "Natural Resources, National Accounting and Economic Depreciation," Working Papers 771, Queen's University, Department of Economics.
  9. Nordhaus, William D, 1991. "To Slow or Not to Slow: The Economics of the Greenhouse Effect," Economic Journal, Royal Economic Society, vol. 101(407), pages 920-37, July.
  10. Falk Ita & Mendelsohn Robert, 1993. "The Economics of Controlling Stock Pollutants: An Efficient Strategy for Greenhouse Gases," Journal of Environmental Economics and Management, Elsevier, vol. 25(1), pages 76-88, July.
  11. Tahvonen, Olli, 1994. "Carbon dioxide abatement as a differential game," European Journal of Political Economy, Elsevier, vol. 10(4), pages 685-705, December.
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