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Optimal Emission Policy under the Risk of Irreversible Pollution / Alain Ayong Le Kama, Aude Pommeret, Fabien Prieur. FEEM, 2011, 27 p. (Note de lavoro ; 2011.014)http://www.feem.it/userfiles/attach/201121010214NDL2011-014.pdfWe consider an optimal consumption and pollution problem that has two  important features. Environmental damages due to economic activities may  be irreversible and the level at which the degradation becomes irreversible is unknown. Particular  attention is paid to the situation where agents are relatively impatient  and/or do not care a lot about the environment and/or Nature  regenerates at low rate. We show that the optimal policy of the  uncertain problem drives the economy in the long run toward a steady  state while, when ignoring irreversibility, the economy follows a  balanced growth path accompanied by a perpetual decrease in  environmental quality and consumption, both asymptotically converging  toward zero. Therefore, accounting for the risk of irreversibility  induces more conservative decisions regarding consumption and polluting  emissions. In general, however, we cannot rule out situations where the  economy will optimally follow an irreversible path and consequently,  will also be left, in the long run, with an irreversibly degraded  environment. (© FEEM)