Pollution Stock Research Articles

The role of taxation in an integrated economic-environmental model: a dynamical analysis

AbstractWe propose a model with economic and environmental domains that interact with each other. The economic sphere is described by a Solow growth model, in which productivity is not exogenous but negatively affected by the stock of pollution that stems from the production process. A regulator can charge a tax on production, and the resources collected from taxation are used to reduce pollution. The resulting model consists of a two dimensional discrete dynamical system, and we study the role of taxation from both a static and a dynamical point of view. The focus is on the determination of the conditions under which taxation has a positive effect on the environment and leads to economic growth. Moreover, we show that a suitable environmental policy can allow recovering both local and global stability of the steady states. On the contrary, we show that, if the policy is not adequate, the system can exhibit endogenous oscillating and chaotic behavior and multistability phenomena.

The impact of pollution transmission networks in a transboundary pollution game

To explore transboundary pollution games with network externalities, this study develops a multi-region differential game which investigates the interaction and co-evolution of multiple pollution stocks across a continuous horizon. Pollution transmission networks are incorporated into the model via an adjacency matrix, detailing transmission paths of pollution across regions. Equilibrium strategies for emissions and investments in pollution control are obtained through a system of coupled differential equations. Our study demonstrates that these equilibrium strategies and the corresponding discounted net welfare of regions depend crucially on the structure of pollution transmission networks. The spectral properties of networks can effectively discern the evolutionary stability of equilibrium strategies. Through a numerical simulation of multiregional pollution dynamics, we also show that regions' motivation for pollution control decreases continuously as their influence in pollution transmission networks (i.e., network influence) increases; Nevertheless, an increase in a region's network influence can significantly reduce local pollution stocks in cycle networks but increase them in tree networks.

Paving the way for sustainable environment in BRICS through technological innovation, sustainable energy, and financial development: heterogenous analyses

ABSTRACT The pervasive issue of global warming has propelled the continued empirical efforts by policymakers and research pundits geared towards finding sustainable solutions to salvaging the ecosystem. Consequently, this study evaluates the heterogenous impacts of technological innovation, sustainable energy, and financial development on environmental sustainability captured by CO2 emissions, methane emissions, and nitrous oxide emissions in the BRICS countries from 1995 to 2020. The study employs second-generation estimators comprising quantile regression (QR), augmented mean (AMG), common correlation effect group mean (CCEMG), and cross-sectional ARDL (CS-ARDL). The main findings show that among the indicators of technological innovation, high technology exports, ICT goods exports, and ICT services exports drive sustainable environment in the long run whereas environmental-related technology promotes both in the short run and long run. The moderating impacts of sustainable energy are evident through wind energy, solar energy, and hydrogen technology. Conversely, financial development measured by broad money and domestic credits to private sector hinders environmental sustainability. More so, the covariates entailing economic growth, population growth, poverty, and trade openness escalate the stock of pollutants. The empirical regularity of the main estimators is supported by outcomes of QR across the low, middle, and upper quantiles. On the policy front, the study recommends promoting initiatives that drive technology and renewable energy to enhance the sustainability of the BRICS’ environment.

Commitment under uncertainty: production-inventory policies associated with environmental considerations

We consider a manufacturer that produces in response to a stochastic demand and emits pollution during the production process. Industrial pollutants released into the air are characterised by spatial variability and heterogeneity, and the precision of instruments for measuring stochastic pollution stocks varies widely across pollutants. Consequently, commitment (open-loop) strategies to control production and associated emissions are considered more practical than contingent (feedback) approaches when manufacturers are concerned about environmental consequences. In this article, we derive an optimal, open-loop control policy over an infinite time horizon and show a condition that ensures that such a policy induces asymptotic convergence of expected inventory stock and pollution stock trajectories to unique steady states. Moreover, we find that the variance in the pollution stock also converges asymptotically to a unique steady state, which is critical for prevention of irreversible environmental consequences. We show that environmental uncertainty affects inventories, leading, in the long run, to lower expected steady-state inventory stocks. We compare feedback and open-loop production policies and show that though there are losses associated with the inability to track inventory and pollution stocks accurately and thus applying the open-loop control instead of feedback, the expected long-term inventory and pollution stocks are not affected.

The economic and environmental effects of China's environmental expenditure under financing constraints.

Sound ecological and environmental governance systems are critical for promoting green and low-carbon economic transformation and high-quality development. However, financing constraints are major obstacle to the revitalization and transformation of China's real economy. In this study, we constructed an environmental dynamic stochastic general equilibrium (E-DSGE) model that incorporates two types of environmental expenditure and financing constraints, and discussed their economic and environmental effects. Based on this, we further considered the impacts of financing constraints on policy effects. Firstly, we found that increases in carbon emission reduction subsidies in government expenditure (1) increase total economic output and (2) motivate enterprises to increase emission reduction efforts and reduce pollution intensity and emissions, thereby reducing the inventory of environmental pollutants while balancing economic benefits and emission reduction. Secondly, increasing the proportion of government special expenditure on environmental protection promote output growth and directly reduces the pollution stock in the environment. However, such policies may also reduce the emission reduction efforts of enterprises, leading to increases in their pollution emissions and intensity. Lastly, the existence of financing constraints is not conducive to the growth of total output but increases the pollution control effect of emission reduction subsidies and pollution prevention expenditure. Application of the E-DSGE model offers new theoretical insight into environmental economics and macroeconomics. Moreover, the results of this study provide a reference for optimizing the structure of fiscal expenditure.

Commentary: climate policy in Aotearoa New Zealand – a backwards flip?

In 1975, Chris Nobbs, a young New Zealander trained in chemistry and economics and working at the Environment Directorate of the OECD in Paris, wrote a paper titled ‘The economics of stock pollutants: the example of cadmium’. Together with David Pearce, later an eminent environmental economist, he noted that ‘pollution taxes will not secure the optimal level of pollution … since such taxes are relevant only for flow pollutant situations’ (Nobbs and Pearce, 1975). It was not until a generation later that it became widely accepted that carbon dioxide itself is a stock pollutant and that only ‘net zero’ CO2 emissions will halt CO2-induced global warming (Fankhauser et al., 2022). This has led to nearly 100 states and 1,000 large companies establishing net zero goals (Hale et al., 2022). One such is New Zealand’s Climate Change Response (Zero Carbon) Amendment Act 2019, which requires the government to set and meet carbon budgets to reach net zero long-lived greenhouse gas emissions by, and beyond, 2050.

Temporary prosperity or sustainable development: the long-run impact of developing pollution-intensive industries

Abstract This paper proposes a dynamic model to capture the interaction among the environment, human capital accumulation, and economic growth. We emphasize the mechanism that pollution stock depresses human capital accumulation, which has received increasing support from empirical studies. The model predicts that the development of pollution-intensive industries can help an economy gear up a short-run prosperity, but it impairs the capability for long-run economic growth, trapping the economy at a low development level. The cost for a dirty economy to switch is expensive and even infeasible if the environmental degradation is irreversible. Policy interventions, such as tax on pollution and subsidy on human capital, can help alleviate but cannot eradicate the economic stagnation.

Pollution control: Assessing the Variable Decay of the Pollution Stock in the Environmental Economics Analysis

Pollution control: Assessing the Variable Decay of the Pollution Stock in the Environmental Economics Analysis

Green transition and environmental quality: an evolutionary approach

We propose a model for exploring the feasibility and effectiveness of a green transition from dirty to clean technologies. It relies on an evolutionary framework for the technology selection that accounts for the environmental domain dynamics, in terms of pollution evolution. A regulator charges an environmental tax to the producers, and the agents can choose between the less profitable clean technology and the more profitable dirty one, which, however, is taxed to a greater extent with respect to the clean one. The environmental tax depends endogenously on the level of pollution, which rises because of the producers’ emissions. The pollution stock also naturally decays, and can be abated by involving the resources collected from the taxation. We analytically study the resulting two-dimensional model from both statically and dynamically, to understand under what conditions the green transition can take place and results in an improvement for the environmental quality. We show that excessive over-taxation of the dirty technology may be not beneficial, as steady state pollution level can increase above a certain taxation threshold and multiple steady states can emerge. Moreover, dynamics can result in persistent endogenous oscillations that systematically lead to a significant increase in pollution levels. Finally, we discuss the economic rationale for the results also in the light of possible policy suggestions.

Scoring scheme for Comparative Ranking of impact potential of chemical Alternatives (SCoRA)

BackgroundReplacing hazardous chemicals with safer alternatives is essential for a toxic-free environment. To avoid regrettable substitution, a comparison of the entire spectrum of potential impacts of the candidate for substitution with those of the available alternatives is required. A particular challenge is to also capture yet unknown long-term impacts of (very) persistent chemicals, including but not limited to PBT and CMR properties.ResultsFor a flexible and transparent comparative ranking of the impact potential of chemical alternatives, we propose a concern-based scoring scheme (Scoring scheme for Comparative Ranking of chemical Alternatives, SCoRA). The approach accounts for hazards due to ecotoxicity in water/sediment and soil, and effects on human health such as CMR properties and endocrine disruption. This is combined with exposure-related information in terms of expected environmental pollution stock levels. The SCoRA approach is illustrated with case study chemicals of very high concern (15 SVHC, mostly PBT, representing different chemical classes with different modes of bioaccumulation and toxicity). A comparison of PBT substances reveals that SCoRA goes well beyond binary screening criteria (PBT: yes/no), showing that PBT substances are all of very high concern, although their impact profiles can be substantially different. Ordinal scores support a detailed characterisation of their potential for long-term impacts. Furthermore, SCoRA enables a coherent comparative assessment of substances with different primary concerns, for example PBTness and endocrine disruption.ConclusionsSCoRA complements existing and established tools such as comparative risk assessment. It is particularly useful, when, for example, only limited data are available or when risk assessment is not feasible, as in the case of persistent chemicals. A strength of SCoRA is that the relative contributions of the impact components determining the concern can be visualised with a heatmap and fingerprints. This facilitates communication among scientists, regulators, risk managers, stakeholders and the public.

Abatement technology innovation and pollution tax design: A dynamic analysis in monopoly

In this paper, we devise an alternative environmental policy and design a dynamic environmental tax. The two key features of this approach are: (i) environmental tax is levied on a monopoly firm's emissions intensity (emissions per unit of output) rather than on the firm's total pollution emissions; and (ii) the pollution tax rate is a state variable whose dynamic equation is operationalized with an exponential smoothing process of historical emissions intensity. We compare results from when the monopolist chooses how much effort to expend on developing clean production technology to those when it is chosen by an environmental regulator. Our main results show that: 1) whether under the firm's decision or regulator's adjustment, the saddle-point stability of steady-state equilibrium depends on the discount rate, decay rate of pollutants, and adjustment parameter; 2) the monopolist's output level is higher when the regulator chooses the firm's innovation effort than when the firm does so; 3) when a benevolent regulator chooses the firm's clean technology innovation effort, the level of effort and the resulting level of clean technology are both greater than when the firm makes this choice; 4) the pollution tax and pollution stock are higher under the firm's decision than under the regulator's adjustment.

Transboundary watershed pollution control analysis for pollution abatement and ecological compensation.

The effect of watershed environmental management is closely related to the cooperation modes of upstream and downstream regions pollution control, but the existing literature rarely considers it. Additionally, based on the cumulative and cross-border impacts of pollution discharge in different regions, it is appropriate to use dynamic game theory to study pollution control problems. Therefore, this paper develops a dynamic multi game model to analyze the pollution control game behavior between the upstream and downstream regions along the basin in three scenarios: non-cooperation, pollution abatement cooperation, and ecological compensation. By using the optimal control method, we get the dynamic equilibrium strategies of the government and enterprises and pollution stock trajectories under different cooperation modes. The results show that pollution abatement cooperation can improve the environment, but may not improve social welfare; the eco-compensation mechanism is not always conducive to the improvement of the environment and welfare of the basin, and the effective conditions of implementing ecological compensation is put forward. In addition, we also analyzed the impact of consumer preferences, pollution treatment efficiency, and other parameters on governments and enterprises decision-making and the social welfare. These conclusions provide a theoretical basis for cooperative governance scheme for transboundary pollution in river basin.

Strategic effects of stock pollution: the positive theory of fiscal deficits revisited

This article introduces a dynamic political-economy model of public debt which integrates climate policy. Strategic incentives are shaped by both an emission interaction and a budget interaction if public good provision contributes to a stock of persistent pollution. In a bipartisan system, politicians, who disagree on the optimal internalization of pollution, compete for office. The central finding is that bequeathing a large stock of pollution to the future government is not optimal for any incumbent regardless of their environmental preferences. This leads to strategic emission abatement in the first period. Additionally, while the incumbent engages in strategic deficit spending when reelection is uncertain, this effect is no longer necessarily inefficient when accounting for stock pollution. Both effects may increase welfare as a direct result of reelection uncertainty.

A differential game analysis of multi-regional coalition for transboundary pollution problems

Basin water pollution control problem has become a real and serious challenge to build an environment-friendly and resource-conserving society. Since the water environment is quasi-public property, regional cooperation across upstream and downstream regions is critical for pollution control. Employing the differential game theory, we establish four differential game models of transboundary pollution with multi-regional coalitions. Optimal control theory was used to explore the optimal feedback Nash equilibriums solutions of the four models. Our analysis suggests that cooperation among the three regions is more effective in pollution control. The upstream and midstream cooperation can help the upstream region to increase the pollution abatement level, decrease the pollution emission level and pollution stock. The cooperation between the midstream region and both the upstream and downstream regions can help the midstream region to increase the pollution abatement level and decrease the pollution emission level.

Carbon Dioxide Emissions and Economic Growth Nexus in Nigeria: The Role of Financial Development

This study examines the effect of carbon dioxide emissions on economic growth, including investigating whether the CO2-economic growth relationship is dependent on financial development in Nigeria between 1980 and 2020. Due to dwindling economic growth, Nigeria experienced two recessions in one decade. Besides poor growth rates, Nigeria remains a leading emitter of CO2 in the Sub-Saharan region. The motivation for this study derived from the rising level of carbon dioxide emissions in Nigeria which might affect economic growth by dwindling agricultural activities (low output) in some regions, pose health challenges and create a shortage of inputs to agro-allied industries. Hence, this paper attempted to see if there was a causal relationship between carbon dioxide emissions, financial development, and economic growth in Nigeria. The relationship between the variables was examined using the Autoregressive Distributed Lag estimation technique (ARDL) estimation method. The framework for this study has its basis in the endogenous growth theory and utilizes the growth and pollution stock model which showed that sustainable economic growth is influenced by a large stock of pollution (CO2 emission). The results of the boundaries test for cointegration showed a long-term relationship between CO2 emissions, economic expansion, financial development, and energy use. According to empirical data, CO2 emissions have little long-term impact on economic growth. However, there is evidence that the interaction of CO2 emissions and financial development promotes economic growth over the long term, suggesting that CO2 emissions only have an economic influence when there is financial development.

Estimation of Initial Stock in Pollution Control Problem

A two-player differential game of pollution control with uncertain initial disturbance stock is considered. In pace with contemporary policy in the resource extraction industry, we initiate our research based on a resource extraction differential model with a rehabilitation process in which the firms are required to compensate the local to rehabilitate the polluted and dilapidated areas. Given the reality that the initial pollution stock plays a critical role in the production, and we cannot rigorously determine its actual value, a simulation of the estimation of the initial stock is alternatively investigated through the Pontryagin maximum principle (PMP). The later analytical results by normalized value of information (NVI) indicate the precious influence brought to the final payoff under various estimations of the initial stock both in the cooperative and non-cooperative cases. With such guidance, the player is capable of making a much more judicious decision when it comes to the determination of the initial stock. Furthermore, a numerical example is additionally presented for better comprehension.

International transfer to reduce global inequality and transboundary pollution

In this paper, we analyze the response of the future world’s carbon stock to a reduction in global inequality among countries, using a framework that allows countries to make their environmental policy strategically. Heterogeneity across countries is related to income, emission technology, and environmental damage costs. We show that reducing global inequality would have a mitigating effect on the path of future world’s carbon stock if the relative number of richly-endowed countries in the subgroup of high-tech countries is greater than that in the subgroup of low-tech countries. The response of the future world’s carbon stock to a reduction in global inequality depends on the relative strength of two forces working in opposite directions: the mitigating force and the aggravating force. The mitigating force is associated with a measure of both richly-endowed/high-technology countries and poorly-endowed/low-technology countries. The aggravating force is associated with a measure of both richly-endowed/low-technology countries and poorly-endowed/high-technology countries. Status-seeking motives among countries act as a multiplier of the effects of the inequality reduction on the future path of the pollution stock. Our results highlight complex interactions to scrutinize in the design of international climate change policies while taking global inequality issues into account.

Payments for environmental services strategy for transboundary air pollution: A stochastic differential game perspective

Air pollution has become a global threat to societal development. The main challenges of transboundary air pollution control include two perspectives: uneven socioeconomic development of regions and the diffusion of air pollution. This paper proposes an PES strategy to alleviate transboundary air pollution by coordinating regional economic interests and environmental preferences within the joint prevention and control of air pollution region. To make the model design more realistic, we introduce the stochastic differential game model to characterize the diffusion and uncertainty of air pollution. The optimal feedback Nash equilibrium is derived in three PES scenarios (no PES, dynamic PES, and fixed-fee PES) by using the Hamilton-Jacobi-Bellman equation. Numerical simulations and sensitivity analysis are implemented to compare the optimal strategies under the three PES scenarios. The dynamic PES strategy is shown to outperform the no PES strategy and the fixed-fee PES strategy by encouraging the backward region to cut more emissions. Besides, the confidence interval theory is used to estimate the variation range of air pollution stocks, which provides a powerful diagnostic tool for policy-makers.

Optimal Environmental Policy in a Dynamic Transboundary Pollution Game: Emission Standards, Taxes, and Permit Trading

Global environmental problems such as transboundary pollution and global warming have been recognized as major issues around the world. In practice, governments of all countries are actively exploring various environmental policies to control pollution. The government needs to consider the impact of neighboring regions when formulating environmental policies, especially in the context of transboundary pollution. However, the above problems are less studied, to bridge this gap and aim at solving problems in existing practices, we consider a differential game model of transboundary pollution control to examine which policy is more effective in promoting environmental quality and social welfare in a dynamic and accumulative global pollution context. Three alternative policy instruments, namely emission standards, emission taxes, and emission permit trading, are considered and compared. The results show that the social welfare of each region is the lowest and the total pollution stock is the highest under the emission tax policy due to the “rent-shifting,” “policy-leakage,” and “free-riding” effects. Moreover, the realized level of the environmental policy in the Nash equilibrium of the policy game is distorted away from the socially optimal level. The emission standards policy is found to be better than the emission tax policy and characterized by initiating the rent-shifting effect without the policy-leakage effect. Moreover, the pollution stock of two regions is found to be the lowest and the social welfare is found to be the highest under the emission permit trading policy, which is not associated with any of the three effects. Finally, a numerical example is used to illustrate the results, and a sensitivity analysis is performed in the steady state.

Optimal decision for multi-pollutants problem under ecological compensation mechanism and learning by doing

Multi-pollutants transboundary pollution is a complicated problem, for such problems, the research involves the attributes of pollutants, the degree of separability , whether the abatement cost is separable, etc. To address these challenges, this paper discusses the problem of multi-pollutant transboundary pollution based on differential game theory under the learning by doing and ecological compensation mechanism. Using the dynamic optimal control theory, we obtain the optimal equilibrium strategy under the noncooperation and cooperation model between the two regions and analyze the influence of multi-pollutants characteristics and other parameters on the optimal equilibrium strategy. In our model, the pollutants can be either technological substitutes or complements which are not necessarily separable, and the abatement costs of two pollutants are not separable. Through numerical simulation, the results show that (i) The two pollutants are substitutes or supplements which have no impact on the emission levels of these two pollutants, and as the degree of the inseparability of the two pollutants increases, the emission level decreases gradually; (ii) The abatement investment level of the two pollutants are substitutes is higher than the two pollutants are complements, and the abatement investment level increases with the degree of inseparable under the cooperation and noncooperation models; (iii) The pollution stocks of two pollutants are substitutes is higher than the two pollutants are complements. • Consider multiple pollutants and they are not necessarily separable. • The ecological compensation mechanism and learning by doing are considered. • Exploring and analyzing the optimal strategy between regions.