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Greenhouse Gas Mitigation and Price-Driven Growth in a Solow-Swan Economy with an Environmental Limit

Author

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  • Burda, Michael C.

    (Humboldt University Berlin)

  • Zessner-Spitzenberg, Leopold

    (TU Wien)

Abstract

The existence of an environmental limit in the Solow-Swan economy changes the nature of economic growth, but does not preclude it. When atmospheric greenhouse gases reach a predetermined absolute threshold, further growth requires a permanently expanding, resource-intensive mitigation effort. If the rate of technical progress in mitigation is too low, it becomes the effective constraint on economic growth. Yet growth in both quantities and relative prices remains a robust feature of this class of economies. It also characterizes the social planner's optimum that anticipates the costs of reaching the environmental limit abruptly.

Suggested Citation

  • Burda, Michael C. & Zessner-Spitzenberg, Leopold, 2024. "Greenhouse Gas Mitigation and Price-Driven Growth in a Solow-Swan Economy with an Environmental Limit," IZA Discussion Papers 16771, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp16771
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    References listed on IDEAS

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    More about this item

    Keywords

    Solow-Swan growth model; Baumol cost disease; anthropogenic climate change; mitigation; price-driven economic growth; Ramsey optimal policy;
    All these keywords.

    JEL classification:

    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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