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Can Public Debt Mitigate Environmental Debt? Theory and Empirical Evidence

Mohamed Boly, Jean-Louis Combes, Maxime Menuet, Alexandru Minea, Pascale Combes Motel () and Patrick Villieu
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Pascale Combes Motel: LEO - Laboratoire d'Économie d'Orleans [2022-...] - UO - Université d'Orléans - UT - Université de Tours - UCA - Université Clermont Auvergne

Authors registered in the RePEc Author Service: Pascale Combes Motel

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Abstract: This paper investigates the relationship between public debt and environmental debt—reflecting CO carbon concentration. First, using an endogenous growth model in which pollution abatement spending can be financed by public debt, we show that public debt and environmental debt are complementary in the long run and usually substitutes in the short run. Second, these predictions are empirically confirmed: in particular, a 1% increase in the public debt ratio leads to an increase of 0.74% in cumulative CO per capita in the long run. Our findings emphasize the difficulty of defining policies that jointly serve both the economic (fiscal) and the environmental goals, due to the short- and long-run conflicting environmental effects of policies that either reduce or do not constrain public debt.

Keywords: Environmental debt; Public debt; CO2 emissions; Panel data; Welfare (search for similar items in EconPapers)
Date: 2022-07
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Citations: View citations in EconPapers (3)

Published in Energy Economics, 2022, 111, pp.105895. ⟨10.1016/j.eneco.2022.105895⟩

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DOI: 10.1016/j.eneco.2022.105895

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