When can the environmental profile and emissions reduction be optimised independently of the pollutant level?
Consider a model for optimal timing of a policy measure which changes the emission rate, e.g. trading off the cost of reduction against the time-additive aggregate of environmental damage, the disutility from the pollutant stock <inline-formula><inline-graphic xmlns:xlink="http://www.w3.org/1999/xlink" xlink:href="teep_a_856353_ilm0001.gif"/></inline-formula> the infrastructure contributes to. Intuitively, the optimal timing for an <italic>infinitesimal</italic> pollution source should reasonably not depend on its historical contribution to the stock, as this is negligible. Dropping the size assumption, we show how to reduce the minimisation problem to one not depending on the history of <inline-formula><inline-graphic xmlns:xlink="http://www.w3.org/1999/xlink" xlink:href="teep_a_856353_ilm0002.gif"/></inline-formula>, under linear evolution and suitable linearity or additivity conditions on the damage functional. We employ a functional analysis framework which allows for delay equations, non-Markovian driving noise, a choice between discrete and continuous time, and a menu of integral concepts covering stochastic calculi less frequently used in resource and environmental economics. Examples are given under the common (Markovian Itô) stochastic analysis framework.
Year of publication: |
2014
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Authors: | Framstad, Nils Chr. |
Published in: |
Journal of Environmental Economics and Policy. - Taylor & Francis Journals, ISSN 2160-6544. - Vol. 3.2014, 1, p. 25-45
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Publisher: |
Taylor & Francis Journals |
Saved in:
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