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The Effects of Emission Permits on Growth and the Environment

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  • Tetsuo Ono

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Abstract

We develop an overlapping generations model of growth and the environment in which industrial firms produce environmentally harmful emissions. A government controls the emissions by assigning emission quotas to firms, and permits could be issued and freely traded as financial instruments across firms on the basis of the quotas. We show that an environmental policy that decreases an aggregate number of emission quotas could degenerate economic growth and lower environmental quality in the long run. We also show the implications of this result for environmental policy. Copyright Kluwer Academic Publishers 2002

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Bibliographic Info

Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 21 (2002)
Issue (Month): 1 (January)
Pages: 75-87

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Handle: RePEc:kap:enreec:v:21:y:2002:i:1:p:75-87

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Web page: http://www.springerlink.com/link.asp?id=100263

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Keywords: economic growth; emission permit; environmental quality; overlapping generations;

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References

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  1. Grimaud, Andre, 1999. "Pollution Permits and Sustainable Growth in a Schumpeterian Model," Journal of Environmental Economics and Management, Elsevier, vol. 38(3), pages 249-266, November.
  2. John, A & Pecchenino, R, 1994. "An Overlapping Generations Model of Growth and the Environment," Economic Journal, Royal Economic Society, vol. 104(427), pages 1393-1410, November.
  3. Eric Fisher & Charles van Marrewijk, 1997. "Pollution and Economic Growth," Working Papers 004, Ohio State University, Department of Economics.
  4. Bovenberg, A. Lans & Heijdra, Ben J., 1998. "Environmental tax policy and intergenerational distribution," Journal of Public Economics, Elsevier, vol. 67(1), pages 1-24, January.
  5. Bovenberg, A.L. & Mooij, R.A. de, 1994. "Environmental tax reform and endogenous growth," Discussion Paper 1994-98, Tilburg University, Center for Economic Research.
  6. Stokey, Nancy L, 1998. "Are There Limits to Growth?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 1-31, February.
  7. JOUVET, Pierre-André & MICHEL, Philippe & VIDAL, Jean-Pierre, 1997. "Intergenerational altruism and the environment," CORE Discussion Papers 1997041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Frederick Ploeg & Cees Withagen, 1991. "Pollution control and the Ramsey problem," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 1(2), pages 215-236, June.
  9. Smulders, J.A., 1995. "Environmental quality and pollution-augmenting technological change in a two-sector endogenous growth model," Open Access publications from Tilburg University urn:nbn:nl:ui:12-153411, Tilburg University.
  10. Bovenberg, A.L. & Smulders, J.A., 1996. "Transitional impacts of environmental policy in an endogenous growth model," Open Access publications from Tilburg University urn:nbn:nl:ui:12-73103, Tilburg University.
  11. Ligthart, J.E. & Ploeg, F. van der, 1994. "Pollution, the cost of public funds and endogenous growth," Open Access publications from Tilburg University urn:nbn:nl:ui:12-376258, Tilburg University.
  12. John, A. & Pecchenino, R. & Schimmelpfennig, D. & Schreft, S., 1995. "Short-lived agents and the long-lived environment," Journal of Public Economics, Elsevier, vol. 58(1), pages 127-141, September.
  13. Marini Giancarlo & Scaramozzino Pasquale, 1995. "Overlapping Generations and Environmental Control," Journal of Environmental Economics and Management, Elsevier, vol. 29(1), pages 64-77, July.
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Citations

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Cited by:
  1. Pierre-André Jouvet & Fabien Prieur, 2006. "Permis de pollution et contraintes politiques dans un modèle à générations imbriquées," EconomiX Working Papers 2006-21, University of Paris West - Nanterre la Défense, EconomiX.
  2. repec:hal:journl:halshs-00384500 is not listed on IDEAS
  3. Gilles Rotillon & Pierre-André Jouvet & Philippe Michel, 2004. "Equilibrium with a Market of Permits," Working Papers 2004.94, Fondazione Eni Enrico Mattei.
  4. repec:hal:journl:halshs-00492178 is not listed on IDEAS
  5. Karl Farmer, 2011. "Public-Debt Sustainability, Real Exchange Rate, and Country-Specific Saving Rates," International Advances in Economic Research, Springer, vol. 17(1), pages 45-65, February.
  6. Ingrid Ott & Susanne Soretz, 2006. "Nachhaltige Entwicklung durch endogeneUmweltwahrnehmung," Working Paper Series in Economics 24, University of Lüneburg, Institute of Economics.
  7. Birgit Bednar-Friedl, 2012. "Climate policy targets in emerging and industrialized economies: the influence of technological differences, environmental preferences and propensity to save," Empirica, Springer, vol. 39(2), pages 191-215, May.
  8. Karl Farmer & Matthias Schelnast, 2013. "Public Debt Reduction in Advanced Countries and Its Impact on Emerging Countries," International Advances in Economic Research, Springer, vol. 19(2), pages 167-188, May.
  9. Wei-Bin Zhang, 2013. "Dynamic Interactions among Growth, Environmental Change, Habit Formation, and Preference Change," The International Journal of Economic Behavior - IJEB, Faculty of Business and Administration, University of Bucharest, vol. 3(1), pages 3-25, December.
  10. Pierre-André Jouvet & Philippe Michel & Gilles Rotillon, 2004. "Optimal growth with pollution : how to use pollution permits ?," Cahiers de la Maison des Sciences Economiques v04012, Université Panthéon-Sorbonne (Paris 1).
  11. Birgit Bednar-Friedl & Karl Farmer, 2009. "Internationally Coordinated Emission Permit Policies: An Option for Withdrawers from the Kyoto Protocol?," CESifo Working Paper Series 2764, CESifo Group Munich.
  12. Pautrel, Xavier, 2012. "Environmental Policy, Education And Growth: A Reappraisal When Lifetime Is Finite," Macroeconomic Dynamics, Cambridge University Press, vol. 16(05), pages 661-685, November.
  13. Birgit Bednar-Friedl & Karl Farmer & Andreas Rainer, 2010. "Effects of Unilateral Climate Policy on Terms of Trade, Capital Accumulation, and Welfare in a World Economy," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 47(4), pages 495-520, December.
  14. Bednar-Friedl, Birgit & Farmer, Karl, 2010. "External balance, dynamic efficiency, and the welfare effects of unilateral and multilateral permit policies in interdependent economies," Economic Modelling, Elsevier, vol. 27(5), pages 980-990, September.
  15. Everett, Tim & Ishwaran, Mallika & Ansaloni, Gian Paolo & Rubin, Alex, 2010. "Economic growth and the environment," MPRA Paper 23585, University Library of Munich, Germany.

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