Optimal Controls in Models of Economic Growth and the Environment
We investigate the impact of environmental quality standards on the accumulation of two types of capital (“brown” vs. “green”) and the corresponding R&D investments in an endogenous growth model. We show that environmental regulation as economic policy instrument rather represses economic growth in the long run but fosters green R&D and the accumulation of green capital in the short run. In addition we show that subsidies may support a shift to a greener production and can be used to counteract against repressed accumulation of green capital.
KeywordsEnvironmental Regulation Phase Portrait Capital Stock Abatement Cost Environmental Quality Standard
Unable to display preview. Download preview PDF.
- 1.Chevallier, J., Etner, J., Jouvet, P.A.: Bankable pollution permits under uncertainty and optimal risk management rules – theory and empirical evidence. EconomiX Working Paper 25 (2008)Google Scholar
- 4.Helfand, G.E.: Standards versus standards – the effects of different pollution restrictions. American Economic Review 81, 622–634 (1992)Google Scholar
- 5.Intergovernmental Panel on Climate Change: IPCC Fourth Assessment Report – Climate Change, AR4 (2007)Google Scholar
- 6.Moser, E.: Optimal Controls in Models of Economic Growth and the Environment. Master Thesis, Vienna University of Technology (2010)Google Scholar
- 7.Rauscher, M.: Green R&D versus end-of-pipe emission abatement – a model of directed technical change. Thuenen-Series of Applied Economic Theory 106 (2009)Google Scholar