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Environmental Policy and Public Debt Stabilization

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  • Mouez Fodha

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Thomas Seegmuller

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

This article analyzes the consequences of environmental tax policy under public debt stabilization constraint. A public sector of pollution abatement is financed by a tax on pollutant emissions and/or by public debt. In the same time, households can also invest in private pollution abatement activities. We show that the economy may be characterized by an environmental-poverty trap if debt is too large or public abatement is not sufficiently efficient with respect to the private one. However, there exists a level of public abatement and debt for a stable steady state to be optimal.

Suggested Citation

  • Mouez Fodha & Thomas Seegmuller, 2010. "Environmental Policy and Public Debt Stabilization," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00512789, HAL.
    • Handle: RePEc:hal:cesptp:halshs-00512789
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00512789
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