Scandinavian Working Papers in Economics
Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science
No 2004/7: Pollution Decay, Consumer Awareness and Optimal Carbon Taxes
Leif Kristoffer Sandal () and Stein Ivar Steinshamn ()
Additional contact information
Leif Kristoffer Sandal: Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Finance and Management Science, Helleveien 30, N-5045 Bergen, Norway
Stein Ivar Steinshamn: Centre for Fisheries Economics, Institute for Research in Economics and Business Administration (SNF), Postal: SNF, Breiviksveien 40, N-5045 Bergen, Norway
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.
Keywords: Global warming; fossil fuel extraction; dynamic optimisation
31 pages, June 1, 2004
Full text files
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