 Fiscal and Environmental Sustainability: Is Public Debt Environmentally Friendly?Matilda Baret () and
Maxime Menuet
Post-Print from HAL Abstract: This article assesses the dilemma that most governments face when seeking to ensure the sustainability of their public finances through economic growth while simultaneously protecting the environment. We propose a growth model in which the government finances abatement-spending through taxation or public debt and which follows a fiscal rule that targets the long-run debt-to-GDP ratio. We show that there is a threshold for the debt ratio below which debt and environmental sustainability are secured. In steady state, the debt ratio exerts a nonlinear effect on environmental quality in the form of an inverted U-shaped curve, and the environmental tax is good for the environment when public debt is not. A fiscal rule authorizing a small but strictly positive debt ratio could help the government to implement adaptation policies for environmental protection while supporting long-run economic growth. Date: 2024-03-05 Published in Environmental and Resource Economics, 2024, 87 (6), pp.1497-1520. ⟨10.1007/s10640-024-00847-0⟩ There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04802113 DOI: 10.1007/s10640-024-00847-0 Access Statistics for this paper More papers in Post-Print from HAL |
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