When can environmental profile and emissions reductions be optimized independently of the pollutant level?

Nils Framstad

No 12/2013, Memorandum from Oslo University, Department of Economics

Abstract: Consider a model for optimal timing of emissions reduction, trading off the cost of the reduction against the time-additive aggregate of environmental damage, the disutility from the pollutant stock M(t) the infrastructure contributes to. Intuitively, the optimal timing for an infinitesimal pollution source should reasonably not depend on its historical contribution to the stock, as this is negligible. Dropping the size assumption, we show how to reduce the minimization problem to one not depending on the history of M, under linear evolution and suitable linearity or additivity conditions on the damage functional. We employ a functional analysis framework which allows for delay equations, non-Markovian driving noise, a choice between discrete and continuous time, and a menu of integral concepts covering stochastic calculi less frequently used in resource and environmental economics. Examples are given under the common (Markovian Itô) stochastic analysis framework.

Keywords: Optmal control; optimal stopping; environmental policy; emissions reduction; linear model; Banach space; stochastic differential equations (search for similar items in EconPapers)
JEL-codes: C61 Q52 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2013-05-16
New Economics Papers: this item is included in nep-ene, nep-env, nep-reg and nep-res
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: When can the environmental profile and emissions reduction be optimised independently of the pollutant level? (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:osloec:2013_012

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