Optimal energy use in a polluted environment

Abstract

Some of the basic issues involved in the optimal intertemporal use of energy resources when there are environmental spillovers are examined at a macroeconomic level and in a world of certainty. Several scenarios are considered with varying assumptions concerning the depletability of the energy resource stock and the nature of pollution production. In particular, with an accumulating form of pollution it is shown that initially the energy resource should be used more slowly to reduce environmental damage and over the plan the rate of use should be increased—a counter-Hotellian result.