Environmental Policy and Growth in a Model with Endogenous Environmental Awareness

Karine Constant (1) , Marion Davin (1)

1 GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille

This paper examines the relationship between environmental policy and growth when green preferences are endogenously determined by education and pollution. The government can implement a tax on pollution and recycle the revenue in public pollution abatement and/or education subsidy (influencing green behaviors). When agent's preferences for the environment are highly sensitive to environmental damages, the economy can converge to a balanced growth path equilibrium with damped oscillations. Therefore, we identify two objectives that environmental policy seeks to address: remove oscillations, source of intergenerational inequalities, and enhance the long-term growth rate. We show that a tighter tax allows to achieve both objectives when the tax revenue is well allocated between education and direct environmental protection.

Mots clés: environmental policy; endogenous growth; environmental awareness; education

Domaines: Economies et finances

Karine Constant, Marion Davin. Environmental Policy and Growth in a Model with Endogenous Environmental Awareness. 2014. ⟨halshs-00964540⟩