Abstract:
We consider the problem of optimally driving a polluting economy, based on the seminal model of Lafforgue, Magné and Moreaux (2008). Production generates CO2 which can be sequestered in reservoirs, but these reservoirs leak at a constant rate. We provide a complete description of the solutions to this problem, depending on the values of the parameters. This includes a variety of situations, some of which are very different from those described in the previous models, where no leaks occur. Joint work with Michel Moreaux and Mabel Tidball.