Published in:CESifo Working Paper Series ; No. 6053
Extent:
1 Online-Ressource (38 p)
Language:
English
DOI:
10.2139/ssrn.2851346
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments August 17, 2016 erstellt
Description:
We describe a “business as usual” (BAU) economy in which pollution is a by-product of productive activity by the current generation but “damages” production for future generations. Over time, conditions in the BAU economy become dire: it gets increasingly polluted, consumption falls and generational welfare levels decline. A government introduces costly pollution abatement and finances it via distorting taxes and borrowing on perfect international markets. Pollution levels start to decline, generating downstream welfare gains, some of which the government taxes away, without hurting anyone, to help pay off the debt, that too, in finite time. Along the transition, every generation faces less pollution, consumes more and is happier than if life had continued in the BAU world