Maintaining environmental quality for overlapping generations: Some reflections on the US sky trust initiative

Stéphane Lambrecht

No 2005074, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: Starting from the US Sky Trust claim that the "the sky belongs to us equally", this paper distinguishes two sources through which overlapping generations may consent to the use of the environment whom they are the owners: the common consent of all generations reached behind the Rawlsian veil of ignorance and the specific consents of generations born at different time periods. It proposes two institutions: a fund mandated to implement the common consent by auctioning permits to firms and a voting procedure to implement the specific consents by choosing each generation's preferred level of environmental maintenance. The analysis shows how the specific consent may be, each period, operative or inoperative and that there may be at most two switches between these two regimes on the transition path. Starting from the business as usual steady state, the introduction of these institutions always immediately increases the environmental quality, but the magnitude of this gain may be temporary and decrease if capital accumulation is strongly evicted by the policy. On the opposite, we stress a case in which the introduction of the policy has beneficial effects both on wealth and quality.

Keywords: OLG models; environmental quality (search for similar items in EconPapers)
JEL-codes: D91 Q28 (search for similar items in EconPapers)
Date: 2005-11
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2005074

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