Cumulative Pollution with a Backstop

摘要

In this paper, the authors examine optimal time paths of consumption andproduction in a simple model encompassing production and consumption of a 'dirty' and costlier 'clean' good and a pollution stock that can decline over time with degradation or assimilation, with alternative specifications of the assimilation function. Temporary banning of the polluting commodity is indicated in some cases, and permanent banning also arises along an optimal path when assimilative capacity decreases with pollution.