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Optimal Emission Policy under the Risk of Irreversible Pollution AgEcon
Ayong Le Kama, Alain; Pommeret, Aude; Prieur, Fabien.
We consider an optimal consumption and pollution problem that has two important features. Environmental damages due to economic activities may be irreversible and the level at which the degradation becomes irreversible is unknown. Particular attention is paid to the situation where agents are relatively impatient and/or do not care a lot about the environment and/or Nature regenerates at low rate. We show that the optimal policy of the uncertain problem drives the economy in the long run toward a steady state while, when ignoring irreversibility, the economy follows a balanced growth path accompanied by a perpetual decrease in environmental quality and consumption, both asymptotically converging toward zero. Therefore, accounting for the risk of...
Tipo: Working or Discussion Paper Palavras-chave: Optimal Control; Irreversibility Threshold; Uncertainty; Optimal Reversible; Irreversible Policy; Environmental Economics and Policy; D81; Q54; Q58.
Ano: 2011 URL: http://purl.umn.edu/101292
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