Halkos, George and Papageorgiou, George (2014): Exploring the optimality of cyclical emission rates.

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Abstract
In this paper, the basic assumption is that the environment provides two different kinds of services. First, the environment may serve as an input to the production of conventional goods. For example, the exploitation of an oil source from which one firm extracts the oil which in turn is used as a fossil fuel for an industry. In the worst case, the use of the environment for industrial purposes will negatively affect the environment, e.g. the water quality of a paper mill along a river. Nevertheless, the possibility to pollute, i.e., to save abatement costs, lowers production costs. Hence, firms and consumers evaluate this service positively. Second, the environment itselfclean air, natural creeks and rivers instead of paper mills, hydro power plants, etc.provides amenities and thus a second service that is different, because enjoying this service does not degrade environmental quality. As it is intuitively clear, the environment provides consumptive and nonconsumptive uses. In renewable resources means, the environmental stock may be harvested and used as an input for conventional goods’ production but provides simultaneously a positive externality. The purpose of this paper is to study the dynamics of pollution and the possibility of cycles and instability, while the major finding of this paper is the following: Taking the simplest pollution model with one state and one control variables and extending it into two state variables, equilibrium may change from the fixed point into a limit cycle equilibrium, i.e. the optimal emissions rate may be cyclical.
Item Type:  MPRA Paper 

Original Title:  Exploring the optimality of cyclical emission rates 
Language:  English 
Keywords:  Renewable resources; environmental economics; pollution management. 
Subjects:  C  Mathematical and Quantitative Methods > C6  Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C61  Optimization Techniques ; Programming Models ; Dynamic Analysis C  Mathematical and Quantitative Methods > C6  Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C62  Existence and Stability Conditions of Equilibrium D  Microeconomics > D4  Market Structure, Pricing, and Design > D43  Oligopoly and Other Forms of Market Imperfection H  Public Economics > H2  Taxation, Subsidies, and Revenue > H21  Efficiency ; Optimal Taxation Q  Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5  Environmental Economics > Q50  General Q  Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5  Environmental Economics > Q52  Pollution Control Adoption and Costs ; Distributional Effects ; Employment Effects Q  Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5  Environmental Economics > Q53  Air Pollution ; Water Pollution ; Noise ; Hazardous Waste ; Solid Waste ; Recycling 
Item ID:  54915 
Depositing User:  G.E. Halkos 
Date Deposited:  01 Apr 2014 05:53 
Last Modified:  04 Feb 2017 00:02 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/54915 