From firm to global-level pollution control: The case of transboundary pollution

Abstract

We study the joint determination of optimal investment and optimal depollution in a spatiotemporal framework where pollution is transboundary. Pollution is controlled at a global level. The regulator internalizes that: (i) production generates pollution, which is bad for the wellbeing of population, and that (ii) pollution flows across space driven by a diffusion process. We solve analytically for the optimal investment and depollution spatiotemporal paths and characterize the optimal long-term spatial distribution when relevant. We finally explore numerically the variety of optimal spatial distributions obtained using a core/periphery model where the core differs from the periphery either in terms of input productivity, depollution efficiency or self-cleaning capacity of nature. We also compare the distributions with and without diffusion. Key aspects in the optimal policy of the regulator are the role of aversion to inequality, notably leading to smoothing consumption across locations, and the control of diffusive pollution adding another smoothing engine. Subject classifications: Environment (we deal with pollution control as made clear in the title), Dynamic programming/optimal control (we solve an infinite dimensional optimal pollution control problem), Government (Pollution is transboundary, control is to be exercised by governments).

Analysis of multiple ecological compensation strategies for transboundary pollution control in a river basin

“…Li et al (2019) analyze the pollution abatement decision of transboundary basin pollution under emission permits and find that cooperation leads to increased investment in pollution reduction in upstream regions. Boucekkine et al (2021) focus on the global pollution control issues and investigate the joint determination of optimal investment and emission in the spatiotemporal framework of transboundary pollution. Jiao et al (2021) analyze the issue of cooperative mechanisms to reduce transboundary air pollution.…”

A dynamic theory of spatial externalities

“…. , N , an element (i j , b j ) ∈ A j , we obtain a couple Observe that, choosing any (i, b) ∈ A, the state equation ( 3.3) has a unique solution 13 for each p 0 : S 1 → R + square integrable and the functional (3.6) is well defined and finite (see Boucekkine et al (2021)).…”

“…As in the non-game theoretic model in Boucekkine et al (2021), these functions have a precise meaning. Notice that in the absence of diffusion, one has simply α j (x) = w j (x) x) .…”

Environmental investment as a factor of sustainable economic development in the context of transformation of the external and internal environment

“…Many of the serious environmental problems, facing the world community, cannot be articulated at the level of an individual state or industry. [12] Existing environmental problems are inherently transboundary and can be addressed through the adoption of strategies with coordinated measures and actions at the regional, national and European levels [14]. The development and implementation of Green Transformation Roadmaps will allow to complete industrial restructuring and lower technology costs, contributing to the green transformation process [19].…”