Dynamic optimal control of pollution abatement under emissions permit banking

Shoude Li

Economic Modelling, 2014, vol. 36, issue C, 363-369

Abstract: In a recent work, Dragone et al. (2010) modeled an optimal control model of pollution abatement, and investigated the adoption of a tax levied on the firm's instantaneous contribution to the accumulation of pollution. In this paper, we extend the work of Dragone et al. (2010) by providing a dynamic optimal control model of pollution abatement with emissions permits banking, where the firm is allowed to purchase, sell and bank emissions permits given a finite planning horizon of length. Our objective is to find the optimal levels of the production, the pollution abatement investment and the quantity of emissions permits bought or sold in continuous time through the use of optimal control theory. We illustrate the results with a numerical example.

Keywords: Environmental externalities; Pollution abatement; Emissions permit banking (search for similar items in EconPapers)
JEL-codes: D21 L51 Q52 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:36:y:2014:i:c:p:363-369

DOI: 10.1016/j.econmod.2013.10.011

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