Methods and Applications of Dynamic Optimization Techniques in Environmental and Resource Economics.

This paper analyzes to which extent dynamic optimization methods widen the range for addressing environmental and resource economic problems and improve the quality of environmental and resource economic policy recommendations. Moreover new fields for the application of these methods in environmental and resource economics are presented which part from the traditional concept of intertemporal optimization. These new applications incorporate beside intertemporal decision problems also the aspect of uncertainty, of space or any other qualitative aspect. The discussed dynamic optimization methods comprise dynamic programming and optimal control as a function of time, or one-dimensional space which is for instance given by a land classification system. Moreover we present two stage optimal control where the control variable is a function of time and space, or a function of time and some other heterogeneous quality aspect, but the state variable depends only on time. Finally we discuss distributed optimal control where both, the control and state variable, depend on time and space or on time and some other heterogeneous quality aspect. These quality aspects could be given for example by the distribution of the age of a population, by the distribution of the size of the tree trunks, or by the distribution of income of the economic agents.