Polluting non-renewable resources, innovation and growth: welfare and environmental policy

André Grimaud and Luc Rouge
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André Grimaud: LERNA - Economie des Ressources Naturelles - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - INRA - Institut National de la Recherche Agronomique - CEA - Commissariat à l'énergie atomique et aux énergies alternatives

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Abstract: We analyze the impact of the pollution generated by the use of non-renewable resources on the standard results of growth models. In this context, we obtain a Hotelling rule which is not a pure efficiency condition any longer. Subsequently, we show that some of the optimal paths' standard properties change: in particular, an increase in the households' psychological discount rate leads to a slower extraction of the resource. Moreover, we present a simple endogenous growth model that allows us to study the effects of an environmental policy aimed at correcting the distortion introduced at the equilibrium. We show that the tax level does not matter, and that a decreasing tax on the resource use yields the optimum.

Keywords: NON-RENEWABLE RESOURCES; INNOVATION; GROWTH; EXTRACTION PATH; ENVIRONMENTAL POLICY; POLLUTION (search for similar items in EconPapers)
Date: 2005
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Published in Resource and Energy Economics, 2005, 27 (2), pp.109-129. ⟨10.1016/j.reseneeco.2004.06.004⟩

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Journal Article: Polluting non-renewable resources, innovation and growth: welfare and environmental policy (2005)
Working Paper: Polluting Non-Renewable Resources, Innovation and Growth: Welfare and Environmental Policy (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02675522

DOI: 10.1016/j.reseneeco.2004.06.004

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