Non Catastrophic Endogenous Growth with Pollution and Abatment

Aznar-Marquez J. and José Ruiz-Tamarit

No 2005002, Discussion Papers (ECON - Département des Sciences Economiques) from Université catholique de Louvain, Département des Sciences Economiques

Abstract: When there are pollution externalities the competitive equilibrium is not Pareto-optimal nor environmentally sustainable even if abatment activities are endogenously decided. In this paper we introduce the possibility of an ecological catastrophe like the one predicted by the global climate change, imposing the constraint of an upper-limit to the pollutants stock. We characterize this socially optimal soclution and study conditions for the sustainability of the balanced growth path. We find a trade-off between environmental quality and growth. The rate of growth depends negatively on the weight of environmental care in the utility function and positively on the population growth rate. We show that the emissions reduction recommended in the Kioto protocol is an appropriate policy to avoid the ecological catastrophe and ensure global efficiency and positive long-run growth.

Keywords: Environment; Externalities; Optimal Growth, Ecological Catastrophe; Sustainability (search for similar items in EconPapers)
JEL-codes: C61 C62 O41 Q5 (search for similar items in EconPapers)
Date: 2005-01-01
New Economics Papers: this item is included in nep-ene and nep-env
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Related works:
Working Paper: Non-Catastrophic Endogenous Growth with Pollution and Abatement (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvec:2005002

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