Exploring the optimality of cyclical emission rates
In this paper, one of the basic assumptions is that the environment provides two different kinds of services. First, the environment may serve as an input to the production of conventional goods. For example, the exploitation of an oil source from which one firm extracts the oil which in turn is used as a fossil fuel for an industry. In the worst case, the use of the environment for industrial purposes will negatively affect the environment, e.g. the water quality of a paper mill along a river. Nevertheless, the possibility to pollute, i.e., to save abatement costs, lowers production costs. Hence, firms and consumers evaluate this service positively. Second, the environment itself-clean air, natural creeks and rivers instead of paper mills, hydro power plants, etc.-provides amenities and thus a second service that is different, because enjoying this service does not degrade environmental quality. As it is intuitively clear, the environment provides consumptive and non-consumptive uses. In renewable resources means, the environmental stock may be harvested and used as an input for conventional goodsÃƒÂ¢Ã¯Â¿Â½Ã¯Â¿Â½ production but provides simultaneously a positive externality. The purpose of this paper is to study the dynamics of pollution and the possibility of cycles and instability, while the major findings of this paper are the following: First, taking the simplest pollution model with one state and one control variables and extending it into two state variables, equilibrium may change from the fixed point into a limit cycle equilibrium, i.e. the optimal emissions rate may be cyclical. Second, taking the conflicting case as a differential game we found again the conditions under which the richer limit cycle equilibrium takes place.
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- Mäler, K-G. & Xepapadeas, A. & de Zeeuw, A.J., 2003.
"The economics of shallow lakes,"
Other publications TiSEM
368f83ad-bc2f-4ad4-b603-8, Tilburg University, School of Economics and Management.
- Dockner,Engelbert J. & Jorgensen,Steffen & Long,Ngo Van & Sorger,Gerhard, 2000. "Differential Games in Economics and Management Science," Cambridge Books, Cambridge University Press, number 9780521637329, December.
- Xepapadeas, A. P., 1992. "Environmental policy design and dynamic nonpoint-source pollution," Journal of Environmental Economics and Management, Elsevier, vol. 23(1), pages 22-39, July.
- Skiba, A K, 1978. "Optimal Growth with a Convex-Concave Production Function," Econometrica, Econometric Society, vol. 46(3), pages 527-539, May.
- Wirl Franz, 1995. "The Cyclical Exploitation of Renewable Resource Stocks May Be Optimal," Journal of Environmental Economics and Management, Elsevier, vol. 29(2), pages 252-261, September.
- 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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