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Pollution Decay, Consumer Awareness and Optimal Carbon Taxes

Author

Listed:
  • Sandal, Leif Kristoffer

    (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)

  • Steinshamn, Stein Ivar

    (Centre for Fisheries Economics, Institute for Research in Economics and Business Administration (SNF))

Abstract

The effects of non-linear decay and consumer preferences are analyzed in a setting where optimal extraction of non-renewable resources is combined with stock externalities. The control is exercised via a corrective tax and the time horizon is divided into two periods: an initial phase with extraction and a terminal phase without extraction. The time horizon with extraction is determined endogenously. The model does not assume separability of the objective function. Sensitivity results indicate large differences in the optimal extraction period, the total level of extraction and cumulative emissions depending on the form of the decay function and the presence of consumers’ awareness for the environment.

Suggested Citation

  • Sandal, Leif Kristoffer & Steinshamn, Stein Ivar, 2004. "Pollution Decay, Consumer Awareness and Optimal Carbon Taxes," Discussion Papers 2004/7, Norwegian School of Economics, Department of Business and Management Science.
    • Handle: RePEc:hhs:nhhfms:2004_007
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    References listed on IDEAS

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    More about this item

    Keywords

    Global warming; fossil fuel extraction; dynamic optimisation;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General

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