Environmental Policies under Debt Constraint

Mouez Fodha, Thomas Seegmuller and Hiroaki Yamagami

Abstract: This article analyzes the consequences of environmental tax policies when the government imposes a constraint on stabilizing public debt. A public sector of pollution abatement is financed by taxation and by issuing public debt. Considering a simple overlapping-generations model, the tax reform stimulates steady-state investment. Then, the environmental quality and the aggregate consumption increase if and only if (i) pollution abatement is large enough and (ii) there is under-accumulation of the per capita capital stock. This arises if environmental taxation allows a decrease of either income taxation or debt-output ratio.

Keywords: environmental tax reform; debt; public emission abatement; double dividend (search for similar items in EconPapers)
Date: 2014-06
New Economics Papers: this item is included in nep-dge, nep-ene, nep-env, nep-pbe and nep-res
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01023798
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Working Paper: Environmental Policies under Debt Constraint (2014)
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