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

We study the dynamic problem of pollution control enacted by some policy of regulation and mitigation. The dynamics of the transition from one level of regulation and mitigation to another usually in-volves 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 inat-tention, which is associated with political economy or information constraints. Formally, inattention is modeled by using Nonlinear Model Predictive Control. Therefore, it is a dynamic concept: our policy-makers solve an inter-temporal decision problem with finite horizon that involves the repetitive solu-tion 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.