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On Green Growth with Sustainable Capital

Author

Listed:
  • Parantap Basu

    (Durham University Business School)

  • Tooraj Jamasb

    (Durham University Business School)

Abstract

We develop an endogenous growth model to address a long standing question whether sustainable green growth is feasible by re-allocating resource use between green (natural) and man-made (carbon intensive) capital. In our model, final output is produced with two reproducible inputs, green and man-made capital. The growth of the man-made capital causes depreciation of green capital via carbon emissions which the private sector does not internalize. A benevolent government uses carbon taxes to encourage Örms to substitute carbon intensive man-made capital with green capital that the production technology allows. Doing so, the damage to natural capital by emissions can be reversed through a lower, but socially optimal long run growth. This trade-off between environmental policy and long-run growth can be overcome by a combination of an investment in pollution abatement and higher total factor productivity

Suggested Citation

  • Parantap Basu & Tooraj Jamasb, 2019. "On Green Growth with Sustainable Capital," Working Papers 2019_06, Durham University Business School.
  • Handle: RePEc:dur:durham:2019_06
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    Cited by:

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    4. Robbie Maris & Mark Holmes, 2023. "Economic Growth Theory and Natural Resource Constraints: A Stocktake and Critical Assessment," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 56(2), pages 255-268, June.
    5. Vogt, Christine A. & Andereck, Kathleen L. & Pham, Kim, 2020. "Designing for quality of life and sustainability," Annals of Tourism Research, Elsevier, vol. 83(C).
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    More about this item

    Keywords

    Green growth; sustainability; carbon tax; clean growth; resource substitution;
    All these keywords.

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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