Environmental fiscal policies might be ineffective to control pollution

Esther Fernández, Rafaela Perez and Jesus Ruiz

No E2003/48, Economic Working Papers at Centro de Estudios Andaluces from Centro de Estudios Andaluces

Abstract: In a one sector growth model with pollution in the utility function, the competitive equilibrium can be indeterminate for plausible values of the intertemporal substitution elasticity of consumption and under constant returns to scale. The tax rate on pollution does not enter the condition characterizing indeterminacy. This means that the government is not able to control emissions in the economy by using environmental policies. Non-separability between private consumption and pollution in the utility function is crucial for this result.

Keywords: Indeterminacy; Environmental taxes; Pollution (search for similar items in EconPapers)
JEL-codes: H23 O41 Q28 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2003
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