Pollution control: targets and dynamics

Giuseppe Travaglini

No 1201, Working Papers from University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini

Abstract: In this paper I study the e?ects of environmental regulation which establishes upper and lower binding targets to pollution emissions. Essentially, I deal with the properties of a stochastic model of pollution control in continuous-time under emission targets and uncertainty, emphasizing dynamic nonlinearities. Inside the targets pollution behaves as if it were freely floating until it hits one of the two limits. The model provides three main results. First, I show that binding targets can affect the pollution floating even when the boundaries are currently slack. Solutions of the model show that pollution becomes an S-shaped locus of the fundamentals. Second, I show that binding targets will lead to more stable pollution rate determination within the boundaries, than free floating. Finally, stabilization of pollution is related to the growth rate and volatility of fundamentals, to the sensitivity to expected changes of pollution rate and to the credibility of the authorities in defending the pollution targets.

Keywords: Pollution targets; Optimal stochastic control; Uncertainty; Environmental policy. (search for similar items in EconPapers)
JEL-codes: H23 L51 Q28 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2012, Revised 2012
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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http://www.econ.uniurb.it/RePEc/urb/wpaper/WP_12_01.pdf First version, 2012 (application/pdf)

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