Optimality of irreversible pollution accumulation

O. Tahvonen, C.A.A.M. Withagen

Research output: Contribution to journalArticleAcademicpeer-review

49 Citations (Scopus)

Abstract

This paper considers optimal pollution accumulation when the decay function has an inverted-U shape. Such decay functions have empirical relevance but they lead to nonconvexities in dynamic optimization. The nonconvexity problem is handled here by applying a two-stage optimization procedure. The analysis shows that two qualitatively different optimality candidates may exist simultaneously. We identify cases where the choice can be made on a priori grounds and cases where it requires computation of the present values of both optimality candidates. An optimal emission trajectory leading to irreversible pollution is typically nonmonotonic.
Original languageEnglish
Pages (from-to)1775-1795
Number of pages21
JournalJournal of Economic Dynamics and Control
Volume20
Issue number9-10
DOIs
Publication statusPublished - 1996

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