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The Political economy of environmental policy with overlapping generations

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  • Karp, Larry S.
  • Rezai, Amon

Abstract

A two-sector OLG model illuminates previously unexamined intergenerational effects of a tax that protects an environmental stock. A traded asset capitalizes the economic returns to future tax-induced environmental improvements, benefiting the current asset owners, the old generation. Absent a transfer, the tax harms the young generation by decreasing their real wage. Future generations benefit from the tax-induced improvement in environmental stock. The principal intergenerational conflict arising from public policy is between generations alive at the time society imposes the policy, not between generations alive at different times. A Pareto-improving policy can be implemented under various political economy settings.

Suggested Citation

  • Karp, Larry S. & Rezai, Amon, "undated". "The Political economy of environmental policy with overlapping generations," CUDARE Working Papers 123718, University of California, Berkeley, Department of Agricultural and Resource Economics.
    • Handle: RePEc:ags:ucbecw:123718
    DOI: 10.22004/ag.econ.123718
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    Cited by:

    1. Rausch, Sebastian & Yonezawa, Hidemichi, 2023. "Green technology policies versus carbon pricing: An intergenerational perspective," European Economic Review, Elsevier, vol. 154(C).
    2. Rozenberg, Julie & Vogt-Schilb, Adrien & Hallegatte, Stephane, 2020. "Instrument choice and stranded assets in the transition to clean capital," Journal of Environmental Economics and Management, Elsevier, vol. 100(C).
    3. Karine Constant & Marion Davin, 2019. "Unequal Vulnerability to Climate Change and the Transmission of Adverse Effects Through International Trade," Post-Print hal-04215353, HAL.
    4. Maxime Menuet & Alexandru Minea & Patrick Villieu & Anastasios Xepapadeas, 2024. "Environmental quality along the process of economic growth: a theoretical reappraisal," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 77(4), pages 1219-1258, June.
    5. Pauli Lappi, 2021. "Lobbying for size and slice of the quota," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(5), pages 1143-1162, October.
    6. Di Wang & Yinfeng Liang, 2025. "Environmental decentralization and urban green space provision: based on the multidimensional perspective of decentralization," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 27(5), pages 12013-12044, May.
    7. Kotlikoff, Laurence & Kubler, Felix & Polbin, Andrey & Scheidegger, Simon, 2024. "Can today’s and tomorrow’s world uniformly gain from carbon taxation?," European Economic Review, Elsevier, vol. 168(C).
    8. Richard Jaimes, 2023. "Optimal climate and fiscal policy in an OLG economy," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 25(4), pages 727-752, August.
    9. Arnaud Goussebaïle, 2024. "Democratic Climate Policies with Overlapping Generations," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 87(5), pages 1249-1273, May.
    10. Sai Yuan & Xiongfeng Pan & Mengna Li, 2023. "The nonlinear influence of innovation efficiency on carbon and haze co-control: the threshold effect of environmental decentralization," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(12), pages 14283-14307, December.
    11. Rising, James A. & Taylor, Charlotte & Ives, Matthew C. & Ward, Robert E.t., 2022. "Challenges and innovations in the economic evaluation of the risks of climate change," LSE Research Online Documents on Economics 114941, London School of Economics and Political Science, LSE Library.
    12. Fodha, Mouez & Yamagami, Hiroaki, 2025. "Mitigation or adaptation to climate change? The role of fiscal policy," Macroeconomic Dynamics, Cambridge University Press, vol. 29, pages 1-1, January.
    13. Achim Hagen & Gilbert Kollenbach, 2025. "Climate Policies, Investments, and the Role of Elections," CESifo Working Paper Series 12063, CESifo.
    14. William K Jaeger, 2023. "Climate change and the problem of social cost," PLOS Climate, Public Library of Science, vol. 2(9), pages 1-22, September.
    15. Andersen, Torben M. & Bhattacharya, Joydeep & Liu, Pan, 2018. "A way to resolve intergenerational conflict over the environment under the Pareto criterion using green bonds," ISU General Staff Papers 201808240700001070, Iowa State University, Department of Economics.
    16. Michael Hoel & Sverre A.C. Kittelsen & Snorre Kverndokk, 2015. "Pareto Improving Climate Policies: Distributing the Benefits across Generations and Regions," CESifo Working Paper Series 5487, CESifo.
    17. Bosi, Stefano & Le Van, Cuong & Phung, Giang, 2025. "Economic growth with brown or green capital," Journal of Mathematical Economics, Elsevier, vol. 117(C).
    18. Rising, James A. & Taylor, Charlotte & Ives, Matthew C. & Ward, Robert E.T., 2022. "Challenges and innovations in the economic evaluation of the risks of climate change," Ecological Economics, Elsevier, vol. 197(C).

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