Managing an Accumulative Inorganic Pollutant: An Optimal Tax Prescription for the Social Planner

The paper strives to postulate a possible optimal policy path for a social planner who is concerned with managing the stock of an accumulative pollutant within the society. Using Hamiltonian functions in a dynamic optimizing problem, the paper was able to show that the policy path that will minimize the damages of an accumulative pollutant depends on the steady state of the accumulative pollutant as compared to the level of the accumulative pollutant present within the society. This relationship between the steady state and level of accumulative pollutant determines both abatement levels and pollution tax: policy tool kits for the social planner. The paper concludes that the social planner should advocate for a tax regime that is below the steady state tax level which will imply lower optimal abatement levels initially. The tax can then be increased over time to ensure increased abetment of the stock pollutant.