A relatively optimistic analysis of growth and pollution in a neoclassical framework

A series of neoclassical growth models, allowing for the fact that the production process results in pollution creation as well as useful output, is constructed and analyzed, placing particular emphasis on the role of technical progress. It is seen that firms not subject to pollution control are motivated to create an ever more polluting technology, but with control adequate technical progress allows exponential growth of per capita income with constant (or improving) environmental quality. If both limiting emissions and augmenting the absorptive capacity of the environment are available for pollution control, the marginal productivities of the two methods should be equalized.