Emission Targets and Equilibrium Choice of Technique

Martin Diedrich ()

GE, Growth, Math methods from EconWPA

Abstract: We study the technological pre-conditions for a cost-minimizing choice of technique in the presence of government emission targets on by- products of production. Whether a by-product is a desirable commodity or an undesirable pollutant is determined endogeneously as part of the price-quantity equilibrium solution. Non-trivial counter-examples highlight the potential risk of over-ambitious pollution targets. We show that pollution targets can be supported by the appropriate taxes providing that technology allows for a certain type of labour-intensive pollution abatement activities. Our proof is constructive: the tax equilibria we posit can be computed by the Lemke Complementary Pivoting Algorithm.

Keywords: Multisectoral Growth Theory; Choice of Technique; Pollution Taxes; Permit Markets; Lemke Algorithm (search for similar items in EconPapers)
JEL-codes: C61 D57 O33 Q38 (search for similar items in EconPapers)
Date: 2002-11-05
Note: Type of Document - pdf; prepared on pc; pages: 38
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http://129.3.20.41/eps/ge/papers/0211/0211001.pdf (application/pdf)

Related works:
Working Paper: Emission Targets and Equilibrium Choice of Technique (2002)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpge:0211001

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