Tradable pollution permits in dynamic general equilibrium: Can optimality and acceptability be reconciled?

Thierry Bréchet, Pierre-André Jouvet and Gilles Rotillon

Ecological Economics, 2013, vol. 91, issue C, 89-97

Abstract: In this paper we study the dynamic general equilibrium path of an economy and the associated optimal growth path in a two-sector overlapping generation model with a stock pollutant. A sector (power generation) is polluting, and the other (final good) is not. Pollution is regulated by tradable emission permits. The issue is to see whether the optimal growth path can be replicated in equilibrium with pollution permits, given that some permits must be issued free of charge for the sake of political acceptability. We first analyze the many adverse impacts of free allowances, and then we propose a policy rule that allows optimality and acceptability to be reconciled.

Keywords: General equilibrium; Optimal growth; Pollution; Tradable emission permits; Acceptability (search for similar items in EconPapers)
JEL-codes: D61 D9 Q28 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Tradable pollution permits in dynamic general equilibrium: can optimality and acceptability be reconciled? (2013)
Working Paper: Tradable pollution permits in dynamic general equilibrium: can optimality and acceptability be reconciled? (2013)
Working Paper: Tradable pollution permits in dynamic general equilibrium: can optimality and acceptability be reconciled? (2011)
Working Paper: Tradable pollution permits in dynamic general equilibrium: can optimality and acceptability be reconciled? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolec:v:91:y:2013:i:c:p:89-97

DOI: 10.1016/j.ecolecon.2013.04.004

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