Production-based pollution versus deforestation: optimal policy with state-independent and-dependent environmental absorption efficiency restoration process

Fouad El Ouardighi (), Eugene Khmelnitsky and Marc Leandri
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Fouad El Ouardighi: ESSEC Business School
Eugene Khmelnitsky: Tel Aviv University

Annals of Operations Research, 2020, vol. 292, issue 1, No 1, 26 pages

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 (i) whether production or deforestation is the most detrimental from environmental and social welfare perspectives, and (ii) 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: 2020
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DOI: 10.1007/s10479-020-03638-0

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