Cumulative pollution with a backstop

In this paper we examine optimal time paths of consumption and production in a simple model encompassing production and consumption of a "dirty" and costlier "clean" good and a pollution stock that can decline over time with degradation or assimilation. with alternative specifications of the assimilation function. With positive assimilative capacity, the optimal path often (though not always) settles into a steady state that involves some continued use of the polluting commodity. Temporary banning of the polluting commodity is indicated in some cases, and permanent banning also arises along an optimal path when assimilative capacity decreases with pollution.