Prices versus quantities: Stock pollution control with repeated choice of the instrument

One examines strategies of pollution control through choices between taxes and tradable permits, supposed to be decided at several time periods t 1 , t 2 , … , t I . At each of these time periods, the choice depends on the solution of a dynamic programming problem involving the expectations of the polluting factor of production function z ( t ) and the pollutant stock function S ( t ) . According to coefficients of these two functions in the dynamic problem, it is shown under a broad functional setting that permits are decided for a while, followed by decisions of taxes for all the remaining periods. Finite ( I < ∞ ) , as well as infinite ( I = ∞ ) horizon is considered.