Optimal pollution level: a theoretical identification

Abstract

In this paper, the optimal pollution level is identified under the assumptions of linear, quadratic and exponential cost functions. The corresponding optimal level of environmental policy is evaluated, with analytical forms in the linear and quadratic case, while in the exponential case, these values are obtained approximately. It is shown that, in principle, its existence obeys certain restrictions, which are investigated here. The evaluation of the benefit area is discussed and analytical forms for this particular area are calculated. The positive point, at least from a theoretical point of view, is that both the quadratic and the exponential case obey the same form when evaluating the benefit area. These benefit area evaluations can be used as indexes between different rival policies, and certainly the policy that produces the maximum area is the most beneficial policy.