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Are Pollution Permits a Cure for Unregulated Growth Diseases ?

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Listed:
  • Alain Jean-Marie
  • Philippe Fabien Prieur
  • Philippe Mabel Tidball

Abstract

We consider an OLG model with emissions arising from production and potential irreversible pollution. Pollution control goes through a system of permits and private agents can also maintain the environment. In this setting, we prove that there exist multiple equilibria. Due to the possible irreversibility of pollution, the economy can be dragged into both environmental and poverty traps. First, we show that choosing a global quota on emissions at the lowest level beyond a critical threshold is a means to avoid the two types of traps. Next, we analyze the impact of a political reform on other equilibria. When the agents do not engage in maintenance, a fall in the quota implies a reduction of pollution but is detrimental to capital accumulation while, in the other case, it procures a double dividend.

Suggested Citation

  • Alain Jean-Marie & Philippe Fabien Prieur & Philippe Mabel Tidball, 2007. "Are Pollution Permits a Cure for Unregulated Growth Diseases ?," Working Papers 07-11, LAMETA, Universtiy of Montpellier, revised Oct 2007.
    • Handle: RePEc:lam:wpaper:07-11
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    File URL: http://www.lameta.univ-montp1.fr/Documents/DR2007-11.pdf
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    References listed on IDEAS

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