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Use Less, Pay More: Can Climate Policy Address the Unfortunate Event for Being Poor?

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  • Lucas Bretschger
  • Nujin Suphaphiphat

Abstract

The paper develops a two-region endogenous growth model with climate change affecting the countries' capital stocks negatively. We compare two different policies aimed at supporting less developed countries: climate mitigation by rich countries, which diminishes the increase in stock pollution and hence capital depreciation, and income transfers in the tradition of development aid. Under a mild set of assumptions we find that active climate policies are more efficient for rich economies and also, remarkably, better for poor countries than additional development aid. The main reason is the difference between the two policies with respect to their effects on economic growth. The results are robust with respect to possible model extensions.

Suggested Citation

  • Lucas Bretschger & Nujin Suphaphiphat, 2012. "Use Less, Pay More: Can Climate Policy Address the Unfortunate Event for Being Poor?," CEEES Paper Series CE3S-04/12, European University at St. Petersburg, Department of Economics.
    • Handle: RePEc:eus:ce3swp:0412
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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Climate mitigation versus development aid
      by Economic Logician in Economic Logic on 2012-09-20 19:35:00

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    More about this item

    Keywords

    Climate policy; Development aid; Endogenous growth; Stock pollution;
    All these keywords.

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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