In this paper we study the dynamic general equilibrium path of an economy and the associated optimal growth path in a two-sector overlapping generation model with a stock pollutant. A sector (power generation) is polluting, and the other (final good) is not. Pollution is regulated by tradable...

We study, in a simple model, the partial equilibrium of an industry with n firms endowed by different Cobb-Douglas technologies which have different pollution effects. The price of input (labour) and the demand curve to the industry are given. Pollution is restricted by a tradeable market of...

The impact of environmental innovation on the marginal pollution abatement cost at the firm level is investigated. We show that the common assumption that innovation reduces the marginal abatement cost is wrong. We draw some implications about the incentives to innovate under environmental...