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Optimal Environmental Policy for a Mine Under Polluting Waste Rocks and Stock Pollution

Pauli Lappi and Markku Ollikainen
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Markku Ollikainen: University of Helsinki

Environmental & Resource Economics, 2019, vol. 73, issue 1, 133-158

Abstract: Abstract This study analyzes socially optimal environmental policy for a mine with a model that takes into account waste or waste rock production and abatement possibilities of the mine. We develop a model, in which the mine produces an externality related to the waste rocks, such as acid mine drainage. We find that the extraction rate tends to be lower in a mine with higher waste rock production, and that the optimal tax on the waste rock production is strictly increasing in time. We extend the model to incorporate an additional externality in the form of a stock pollutant. We analyze the optimal taxes and show that the typical result that the time path of the tax on the stock pollutant is inverted U-shaped may be lost in a mine model with abatement possibility and fixed operation period.

Keywords: Emission taxation; Exhaustible resources; Mining; Optimal control; Stock pollution; Waste rock (search for similar items in EconPapers)
JEL-codes: Q30 Q38 Q50 Q58 (search for similar items in EconPapers)
Date: 2019
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