Uncertainty in optimal pollution levels: modelling and evaluating the benefit area

Abstract

This paper identifies the optimal pollution level under the assumptions of linear, quadratic and exponential damage and abatement cost functions and investigates analytically the certain restrictions that the existence of this optimal level requires. The evaluation of the benefit area is discussed and the mathematical formulation provides the appropriate methods for that to be calculated. The positive, at least from a theoretical point of view, is that both the quadratic and the exponential case obey the same form for evaluating the benefit area. These benefit area estimations can be used as indexes between different rival policies, and depending on the environmental problem, the policy that produces the maximum area will be the beneficial policy.