Economic Analysis of Environmental Problems

The following sections are included:

• Dedication
• Preface
• About the Author
• Contents

The following sections are included:

• Introduction
• A Simple Model of Pollution
• Market Solution — The Invisible Hand
• Implementation of a Government or a Market Solution to Pollution
• Two Economies Sharing the Same Natural Resource
• Optimal Path for CO₂ Emission When the Problem is Multi-period
• Optimal Paths of CO₂ Emission for Poor and Rich Economies
• References
• Questions

This chapter describes China's energy and environmental degradation problems in terms of air pollution, water pollution, CO₂ emission and shortage of energy. It discusses the laws enacted, agencies established and policies introduced to solve the energy–environment problems as well as the practical difficulties in the implementation of government environmental policies. Finally, it presents a proposal to improve the protection of China's natural environment.

The following sections are included:

• Introduction
• An Exposition of the Lagrange Method for Solving Optimal Control Problems
• Optimum Path for CO₂ Emission Without Considering the Inertia of Change
• Accounting for the Inertia in the Quantity of Emission and in the Trend of Emission
• Numerical Solutions to the Optimal Path for CO₂ Emission
• Comparison with the Socolow–Lam Optimum Path
• Concluding Comments
• References

The following sections are included:

• Introduction
• A Macroeconomic Model Assuming Pollution to be Proportional to Output
• Estimation of the Macromodel Incorporating Pollution for China
• Market Solution of the Problem of Section 4.2
• A Second Model to Explain China's Pollution
• Using Our Macroeconomic Model to Explain Chinese Data
• Market Solution for the Model of Section 4.5 and the Pricing of Air Pollution Permits
• Effect of Government or Market Failure on the Behavior of the Macroeconomy
• References
• Questions

The following sections are included:

• Introduction
• A Simple Macroeconomic Model for Deciding Whether to Mitigate the Effect of Climate Change: An Exposition of the Lagrange Method for Stochastic Control
• Modeling the Uncertain Effect of Global Warming on Investment in the World Economy
• A Macroeconomic Model Incorporating an Uncertain Effect of Pollution
• Different Purposes of an Optimization Model
• References
• Questions

The following sections are included:

• Introduction
• Two Factors Affecting the Decision Whether to Mitigate Global Warming
• The Importance of the Discount Rate for Mitigating Climate Change in a Continuous-Time Dynamic Model
• An Unknown Parameter Leading to Willingness to Sacrifice Much Present Consumption for the Mitigation of Climate Change
• Why Weitzman's Result is Questionable
• References
• Appendix

In previous chapters I have confined attention to the analysis of environmental policies for one economy. This chapter deals with environmental policies for two or more economies. Two topics will be discussed. The first is concerned with different policies among nations for CO₂ emission affecting climate change. The second is concerned with differences in amounts of emission of industrial pollutants among different provinces in China. These two problems are conceptually different. In the former, the action of one nation affects the welfare of other nations since the accumulation of CO₂ in the atmosphere affects all nations. In the latter, the action of one province does not affect the welfare of other provinces since effects of industrial pollutants are mainly local. Hence the methods of analysis are different for the two cases. The former requires the use of dynamic game while in the latter the behavior of each province is treated separately. Section 7.1 treats the first problem. The second problem is treated in Sections 7.2 and 7.3.

In this chapter, I first present a macroeconomic model incorporating the use of energy in production and capital accumulation in Section 8.1. This model differs from the model of Section 4.5 in having a maximum tolerable level M for emission in the utility function. It is used to explain the reduction of the consumption/output ratio observed from Chinese data. In Section 8.2, a production function with energy as input is estimated using panel data for developing countries in Asia. Section 8.3 presents a model to explain the protection of environment by introducing a variable s for scrubbing. Section 8.4 presents a market solution of the model of Section 8.3, which solves the model as a problem of dynamic optimization on the part of a hypothetical central planner.

The following sections are included:

• Introduction
• Static Analysis of the Demand for and Supply of an Underpriced Input
• Dynamic Analysis of Emission Permits
• A General Equilibrium Analysis of Trading of Emission Permits
• A Proposal to Regulate CO₂ Emission through a UN Resolution
• References

The following sections are included:

• Introduction
• A Theory to Explain the Relation Between Pollution and Output
• Statistical Testing of the Andreoni–Levinson EKC
• Statistical Testing of One Version of the EKC
• Summary
• References

The following sections are included:

• Introduction
• Reducing the Emission of Pollutants from a Given Energy Source
• New Technology to Reduce Emission
• Alternative Sources of Energy
• Practical Problems in the US in Defining Renewable Energy
• Role of Business Enterprises in Promoting Clean Energy
• China's Effort to Promote the Use and Development of Clean Energy
• Possible US-China Cooperation in Promoting Clean Energy Technology
• Possible Role of the United Nations in Coordinating International Efforts to Reduce CO₂ Emission
• References
• Questions

The following section is included:

• Index