Polluting non-renewable resources, tradeable permits and endogenous growth
by Andre Grimaud, Luc Rouge
International Journal of Global Environmental Issues (IJGENVI), Vol. 4, No. 1/2/3, 2004

Abstract: We set up an endogenous growth model with vertical innovations in which the use of a non-renewable resource within the production process generates a flow of pollution. This flow negatively affects the dynamics of the stock of environment, which is an argument of the non-separable utility function. We study the general equilibrium effects of an environmental policy consisting in emissions of tradeable permits. In particular, we show that a more stringent policy can lead, by the channel of the permits price dynamics, to more R&D; in all cases it promotes growth.

Online publication date: Sun, 19-Sep-2004

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