Environmental Sustainability with a Pollution Tax

This paper examines environmentally sustainable growth with reference to climate change assuming two final outputs and two factors of production, accounting for both pollution flow and stock effects. If the elasticity of marginal utility of consumption is greater than one, an optimal pollution tax ensures sustainable growth without any further government intervention. Otherwise, either a high temporal elasticity of substitution in production or consumption is required for sustainability. Even a suboptimal pollution tax may allow sustainable development provided the tax time profile meets certain conditions that are developed and described in this paper.


Issue Date:
2014-04
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/166244
Total Pages:
53
JEL Codes:
O44; Q01; Q56
Series Statement:
Working Paper
14-03




 Record created 2017-04-01, last modified 2017-08-27

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