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Pollution in a globalized world: Are debt transfers among countries a solution?

Marion Davin (), Mouez Fodha () and Thomas Seegmuller ()
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Marion Davin: CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - CNRS - Centre National de la Recherche Scientifique - INRA - Institut National de la Recherche Agronomique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - UM - Université de Montpellier
Thomas Seegmuller: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université

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Abstract: This article analyzes the impacts of debt relief on production and pollution. We develop a two-country overlapping generations model with environmental externalities, public debts and perfect mobility of assets. Pollutant emissions arise from production, but agents may invest in pollution mitigation. Could debt relief be an efficient tool to encourage less developed countries to engage in the fight against climate change? We consider a decrease of the debt of the poor country balanced by an increase of the richer country's debt. We show that debt relief makes it possible to engage poor countries in the process of pollution abatement. Capital, environmental quality and welfare can increase in both countries. This result relies on the environmental sensitivity and the discount factor in the poor country relative to the rich one: the greater they are the more beneficial the debt relief is.

Keywords: Capital market integration; Pollution; Abatement; Overlapping generations; Public debt; Capital market integra- tion (search for similar items in EconPapers)
Date: 2019-10
New Economics Papers: this item is included in nep-dge, nep-ene and nep-env
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-02303265v2
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Working Paper: Pollution in a globalized world: Are debt transfers among countries a solution? (2019) Downloads
Working Paper: Pollution in a globalized world: Are debt transfers among countries a solution? (2019) Downloads
Working Paper: Pollution in a globalized world: Are debt transfers among countries a solution? (2019) Downloads
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