Reflections on Abatement Modelling

In environmental economics it is common to add non-negative constraints on abatement, or equivalently to constrain emissions by some maximum unabated level. However, in this paper it is argued that these assumptions are both physically wrong and complicating. Also, more seriously, such constraints can rule out optimal solutions. For instance, negative NOx abatement can be optimal from the social planner’s point of view since increased emissions give reduced concentrations of polluting ground level ozone in some cases. It is concluded that future contributions can benefit from dropping the constraints on abatement and maximum emissions. It is also shown that marginal abatement costs must have the same sign as abatement to avoid conceptual inconsistencies. Acknowledgements: The Research Council of Norway has financed my work at the Frisch Centre. I want to thank Finn R. Førsund, Rolf Golombek, Rebecca Benestad, Michael Hoel and an anonymous referee for valuable comments.