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Environmental Sustainability with a Pollution Tax

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  • López, Ramón E.
  • Yoon, Sang W.

Abstract

This paper examines environmentally sustainable growth with reference to climate change assuming two final outputs and two factors of production, accounting for both pollution flow and stock effects. If the elasticity of marginal utility of consumption is greater than one, an optimal pollution tax ensures sustainable growth without any further government intervention. Otherwise, either a high temporal elasticity of substitution in production or consumption is required for sustainability. Even a suboptimal pollution tax may allow sustainable development provided the tax time profile meets certain conditions that are developed and described in this paper.

Suggested Citation

  • López, Ramón E. & Yoon, Sang W., 2014. "Environmental Sustainability with a Pollution Tax," Working Papers 166244, University of Maryland, Department of Agricultural and Resource Economics.
  • Handle: RePEc:ags:umdrwp:166244
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    File URL: http://purl.umn.edu/166244
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    Keywords

    sustainable growth; consumption flexibility; technological change; optimal pollution tax; Community/Rural/Urban Development; Environmental Economics and Policy; O44; Q01; Q56;

    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
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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