Sustainable development with stock pollution

The optimal control of pollution is an important challenge for sustainable development policy. On one hand, the restoration of a heavily polluted environment will require initial investment, but in general entails in a development path that is both environmentally and economically sustainable. On the other hand, the optimal trajectories in situations with an initial stock of pollution below the long-term optimum generally imply an increase in pollution and a decline of optimal consumption. Hence, the investment of the environmental rents accruing from nature’s assimilative capacity into man-made capital is required in the sense of the famous Hartwick rule to maintain a constant flow of instantaneous welfare. This would facilitate growth in consumption sufficient to compensate for the rising disutility of pollution