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Environmental policy and the economic downturn

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  • Alex Bowen
  • Nicholas Stern

Abstract

This paper considers how environmental policies should respond to macroeconomic downturns. It first explores the implications of the global economic downturn of 2008-09 for environmental policies, focusing in particular on the example of action against climate change. The arguments for and against activist fiscal policies in general are then reviewed, and the case made that a demand-induced downturn provides a very good opportunity to undertake a necessary step change in the public spending component of environmental policies and to start working through a backlog of public investment to improve the environment. Fiscal policy should be used to improve the allocation of resources across time and space. Recent fiscal stimuli are considered in the light of this discussion. It is also argued that there is little cause to delay the introduction of price signals to internalise environmental externalities. But the levels at which such signals should be set requires careful analysis; changes over the business cycle may be warranted, depending on the nature of the environmental externality and the cause(s) of the business cycle in question.

Suggested Citation

  • Alex Bowen & Nicholas Stern, 2010. "Environmental policy and the economic downturn," GRI Working Papers 16, Grantham Research Institute on Climate Change and the Environment.
  • Handle: RePEc:lsg:lsgwps:wp16
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    File URL: http://www.lse.ac.uk/GranthamInstitute/wp-content/uploads/2014/02/WorkingPaper16.pdf
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    Citations

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    Cited by:

    1. Bowen, Alex, 2011. "Raising finance to support developing country action: some economic considerations," LSE Research Online Documents on Economics 37572, London School of Economics and Political Science, LSE Library.
    2. Elliott, Robert J.R. & Lindley, Joanne K., 2017. "Environmental Jobs and Growth in the United States," Ecological Economics, Elsevier, vol. 132(C), pages 232-244.
    3. Stern, David I. & Gerlagh, Reyer & Burke, Paul J., 2017. "Modeling the emissions–income relationship using long-run growth rates," Environment and Development Economics, Cambridge University Press, vol. 22(06), pages 699-724, December.
    4. Robert J R Elliott & Joanne K Lindley, 2014. "Green Jobs and Growth in the United States: Green Shoots or False Dawn?," Discussion Papers 14-09, Department of Economics, University of Birmingham.
    5. Fankhauser, Sam & Gennaioli, Caterina & Collins, Murray, 2015. "The political economy of passing climate change legislation: evidence from a survey," LSE Research Online Documents on Economics 63352, London School of Economics and Political Science, LSE Library.
    6. Sheldon, Tamara L., 2017. "Asymmetric effects of the business cycle on carbon dioxide emissions," Energy Economics, Elsevier, vol. 61(C), pages 289-297.
    7. Alex Bowen, 2012. "�Green� growth, �green� jobs and labour markets," GRI Working Papers 76, Grantham Research Institute on Climate Change and the Environment.
    8. Valeria Costantini & Francesco Crespi & Elena Paglialunga, 2017. "The Employment Impact Of Private And Public Actions For Energy Efficiency: Evidence From European Industries," Departmental Working Papers of Economics - University 'Roma Tre' 0227, Department of Economics - University Roma Tre.
    9. Paul Ekins & Stefan Speck, 2014. "The fiscal implications of climate change and policy responses," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 19(3), pages 355-374, March.
    10. Paul J. Burke & Md Shahiduzzaman & David I. Stern, 2015. "Carbon dioxide emissions in the short run: The rate and sources of economic growth matter," CAMA Working Papers 2015-12, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    11. Alex Bowen, 2014. "Green growth," Chapters,in: Handbook of Sustainable Development, chapter 15, pages 237-251 Edward Elgar Publishing.
    12. van den Bijgaart, Inge, 2016. "Essays in environmental economics and policy," Other publications TiSEM 298bee2a-cb08-4173-9fe1-8, Tilburg University, School of Economics and Management.
    13. repec:gam:jsusta:v:9:y:2017:i:12:p:2315-:d:122703 is not listed on IDEAS
    14. Shahiduzzaman, Md. & Layton, Allan, 2015. "Changes in CO2 emissions over business cycle recessions and expansions in the United States: A decomposition analysis," Applied Energy, Elsevier, pages 25-35.

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