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Optimal growth with pollution: how to use pollution permits?

Author

Listed:
  • Pierre-André Jouvet

    (GAINS et GREQAM)

  • Philippe Michel

    (GREQAM et EUREQua)

  • Gilles Rotillon

    (THEMA)

Abstract
We study optimal growth and its decentralization in an overlapping generations model. The decentralization of an optimal path needs some specific taxes in addition to lump-sum transfers if there are externalities. The introduction of market of permits allows neutralizing the external environmental effects. We shows that there is a unique management of permits such that the equilibrium coincides with the optimal path: all permits should be auctioned i.e. no permits to firms. This conclusion is in contradiction with the usual pratice of grandfathering

Suggested Citation

  • Pierre-André Jouvet & Philippe Michel & Gilles Rotillon, 2004. "Optimal growth with pollution: how to use pollution permits?," Cahiers de la Maison des Sciences Economiques v04012, Université Panthéon-Sorbonne (Paris 1).
    • Handle: RePEc:mse:wpsorb:v04012
    as

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    File URL: ftp://mse.univ-paris1.fr/pub/mse/cahiers2004/V04012.pdf
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    References listed on IDEAS

    as
    1. Tetsuo Ono, 2002. "The Effects of Emission Permits on Growth and the Environment," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 21(1), pages 75-87, January.
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    11. Stevens, Brandt & Rose, Adam, 2002. "A Dynamic Analysis of the Marketable Permits Approach to Global Warming Policy: A Comparison of Spatial and Temporal Flexibility," Journal of Environmental Economics and Management, Elsevier, vol. 44(1), pages 45-69, July.
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    15. repec:bla:scandj:v:102:y:2000:i:1:p:135-50 is not listed on IDEAS
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Optimal growth; environment; market of permits;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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