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What is environmental sustainability? Optimal environmental policy as a targeting regime

Author

Listed:
  • Aleksandar Vasilev

    (University of Lincoln)

Abstract

We define and model environmental sustainability within a General-Equilibrium framework. The focus in on "environmental fiscal policy" that pursues environmental sustainability, and the optimal sustainability strategy. We compare and contrast the exogenous fiscal-policy case with the optimal (Ramsey) fiscal policy cases. We find that: (i) returning to 100 percent clean environment is not optimal, and thus not a good target, and (ii) optimal environmental policy constitutes trying to manage environmental quality within pre-specified bands, and is thus akin to inflation targeting in the monetary economics literature; we call this environmental quality targeting, which is a novel quantitative criterion to measure environmental sustainability in a dynamic context. This is the first place such an analogy has been established, and where the contribution of this note lies.

Suggested Citation

  • Aleksandar Vasilev, 2022. "What is environmental sustainability? Optimal environmental policy as a targeting regime," Economics Bulletin, AccessEcon, vol. 42(3), pages 1527-1535.
    • Handle: RePEc:ebl:ecbull:eb-22-00002
    as

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    References listed on IDEAS

    as
    1. Jordi Galí, 2015. "Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework and Its Applications Second edition," Economics Books, Princeton University Press, edition 2, number 10495, December.
    2. Vasilev, Aleksandar, 2018. "A Real-Business-Cycle model with pollution and environmental taxation: the case of Bulgaria," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 7(4), pages 441-451.
    3. Ben S. Bernanke & Frederic S. Mishkin, 1997. "Inflation Targeting: A New Framework for Monetary Policy?," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 97-116, Spring.
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    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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