The effects of political short-termism on transitions induced by pollution regulations

We study the dynamic problem of pollution control enacted by some policies of regulation and mitigation. The transition dynamics from one level of regulation and mitigation to another usually involve inter-temporal trade-offs. We focus on how different policymaker’s time horizons affect these trade-offs. We refer to shorter lengths in policymaker’s time horizons as political short-termism or inattention, which is associated with political econ-omy or information constraints. Formally, inattention is modeled by using Nonlinear Model Predictive Control. Therefore, it is a dynamic concept: our policymakers solve an inter-temporal decision problem with a finite horizon that involves the repetitive solution of an optimal control problem at each sampling instant in a receding horizon fashion. We find that political short-termism substantially affects the transition dynamics. It leads to quicker but costlier transitions. It also leads to an under-evaluation of the environmental costs that may accelerate climate change.