Production-Based Pollution vs. Deforestation: Optimal Policy with State-Independent and -Dependent Environmental Absorption Efficiency Restoration Process

Fouad Ouardighi (), Evgeni Khmelnitsky and Marc Leandri
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Fouad Ouardighi: ESSEC Business School
Evgeni Khmelnitsky: Tel Aviv University
Marc Leandri: CEMOTEV – UVSQ-Université Paris Saclay

Chapter Chapter 4 in Essays on Pollution Control in Economics and Management Science, 2025, pp 93-124 from Springer

Abstract: Abstract An important yet largely unexamined issue is how the interaction between deforestation and pollution affects economic and environmental sustainability. This article seeks to bridge the gap by introducing a dynamic model of pollution accumulation where polluting emissions can be mitigated and the absorption efficiency of pollution sinks can be restored. We assume that emissions are due to a production activity, and we include deforestation both as an additional source of emissions and as a cause of the exhaustion of environmental absorption efficiency. To account for the fact that the switching of natural sinks to a pollution source can be either possible, and in such a case even reversible, or impossible, we consider that restoration efforts can be either independent from or dependent on environmental absorption efficiency, i.e., state-independent versus state-dependent restoration efforts. We determine (1) whether production or deforestation is the most detrimental from environmental and social welfare perspectives, and (2) how state-dependent restoration process affects pollution accumulation and deforestation policies and the related environmental and social welfare consequences.

Keywords: Optimal pollution; Deforestation; Environmental absorption efficiency; Restoration process; History dependence (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:lnopch:978-3-031-78227-5_4

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DOI: 10.1007/978-3-031-78227-5_4

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