Energy consumption and environmental pollution: A stochastic model

This paper considers an energy-pollution economic problem which uses a stochastic queue framework. This approach is shown to establish a link between a firm's energy-consuming economic activity and its effects on the pollution that it generates as a function of its activity. An economic model is then used to draw some inferences regarding the effects of selected economic parameters on the propensity to pollute and prevent pollution. In particular, a number of theories pertaining to the effects of pollution and its regulation on the output and competitiveness of firms are elaborated. For example, the Porter hypothesis presuming that a stringent environmental policy improves a firm's competitiveness is analysed in terms of our model. For demonstration purposes, a simple example is used.