Accumulative pollution, "clean technology," and policy design

M.A. Toman, C.A.A.M. Withagen

Research output: Contribution to journalArticleAcademicpeer-review

28 Citations (Scopus)

Abstract

This paper addresses the optimal long-term management of an accumulative but assimilable pollutant through economic incentive policies that restrict more damaging production processes and induce more benign alternatives. Using a simple general equilibrium approach, we consider the possibility that the assimilative capacity of the environment is eventually exhausted by pollution accumulation. In this case, there is a nonconvexity in the problem that gives rise to multiple potential optima; environmental quality may be preserved or completely degraded in the long term. We characterize the circumstances under which phasing out dirty production is consistent with an intertemporally optimizing path and we discuss the design of price-based and quantity-based policies for supporting an optimal solution with the nonconvexity.
Original languageEnglish
Pages (from-to)367-384
Number of pages18
JournalResource and Energy Economics
Volume22
Issue number4
DOIs
Publication statusPublished - 2000

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