Learning and stock effects in environmental regulation: the case of greenhouse gas emissions

The controversy on whether the nature of greenhouse gas emissions and sunk control costs affect the decision-making process on the control of greenhouse gases is examined in a stochastic growth model. Factors considered in the model include the net present value of utility, consumption identity, production function, damage from climate change and sunk nature of abatement. It is concluded that there was no significant relationship between greenhouse gas accumulation and the stock effect and that there is a small stock effect related to sunk control capital.