| Publication |
2013.
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| Summary/Abstract |
We build a general equilibrium model with renewable (non-polluting) and non-renewable (polluting) resources to analyze the interaction and compatibility between economic growth and a cleaner environment. The study is in two phases: (i) resource extraction/production costs are constant; (ii) resource producers invest in knowledge to reduce extraction/production costs, endogenizing technical change. With constant costs, there is a permanent trade-off between economic growth and a cleaner environment. With endogenous technical change, it is possible to harmonize more output and less emissions by replacing non-renewable resources for renewable ones. We also conduct a sensitivity analysis to explore three specific policy actions. With constant costs, the best policy action is the imposition of a higher renewable resources standard, while with endogenous technical change, under certain conditions, all policy interventions may benefit both the economy and the environment.
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