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Sustainability Policy and Environmental Policy

  • John C. V. Pezzey


    (Australian National University, Centre for Resource and Environmental Studies)

A theoretical, representative agent economy with a depletable resource stock, polluting emissions and productive capital is used to contrast environmental policy, which internalises externalised environmental values, with sustainability policy, which achieves some form of intergenerational equity. The obvious environmental policy comprises an emissions tax and a resource stock subsidy, each equal to the respective external cost or benefit. Sustainability policy comprises an incentive affecting the choice between consumption and investment, and can be a consumption tax, capital subsidy or investment subsidy, or combination thereof. Environmental policy can reduce the strength of sustainability policy needed. More specialised results are derived in a closed economy with a non-renewable resource, and in a small open economy with no environmental effects on utility.

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Paper provided by Australian National University, Economics and Environment Network in its series Economics and Environment Network Working Papers with number 0211.

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Length: 42 pages
Date of creation: Oct 2002
Date of revision:
Handle: RePEc:anu:eenwps:0211
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