Abstract

This paper examines the sustainability of charcoal production that maximizes social welfare based on optimal control techniques visa-vis the activities of profit maximizing charcoal producing firms in South Sahara Africa. I set up a theoretical model involving the socially optimal charcoal production that will maximize the socially optimal discounted sum of net benefit of Charcoal production for both the private profit maximization firm and that which will yield sustainability. After solving for the optimal choices for both functions it reveals that there is indeed divergence between these two entities simply because environmental degradation and deforestation (externalities) associated with charcoal production are not internalized into the production function of the profit maximizing charcoal producing firms. These externalities would lead to unsustainability of the forest environment and subsequently deforestation. Fiscal policy measures and public ownerships are recommended to deal with externalities that are inherent in charcoal production so as to improve sustainability while ensuring charcoal continues to provide livelihood benefits for the numerous people that live in the charcoal producing belt.

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