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Simulating sustainable futures - Investigating the implications of CO2 emission caps on economic growth in the OECD

Theopold, Anja Sophia LU and Ericson, Ulrika LU (2023) NEKH01 20231
Department of Economics
Abstract
The matters of economic growth and climate change are both widely subjected to discussions and policymakers are under immense pressure to make decisions that enhance economic growth and stop climate change. Policies that ensure economic growth have traditionally had a negative impact on climate change and vice versa. It is therefore important to study how various policies can address the connection between the two. This paper analyses the potential effectiveness of implementing absolute caps on carbon emitting capital stock and investments in environmentally friendly technology as policy strategies to combat climate change and its implications on economic growth within the OECD. The analysis is based on a model for economic growth that... (More)
The matters of economic growth and climate change are both widely subjected to discussions and policymakers are under immense pressure to make decisions that enhance economic growth and stop climate change. Policies that ensure economic growth have traditionally had a negative impact on climate change and vice versa. It is therefore important to study how various policies can address the connection between the two. This paper analyses the potential effectiveness of implementing absolute caps on carbon emitting capital stock and investments in environmentally friendly technology as policy strategies to combat climate change and its implications on economic growth within the OECD. The analysis is based on a model for economic growth that considers technology to be endogenous. It is conducted through simulations in order to observe the trajectory of GDP per capita as well as accumulated pollution, which is then compared to set carbon budgets. The results show that technological advancements are crucial in order to sustain long-term economic growth. It also shows an initial period of degrowth is likely to happen. The study emphasises the welfare gains that are acquired through sustainability that could compensate for the initial losses in material well being. Further, the results show that a complete reduction in environmentally harmful capital stock is necessary. By investigating these policies, this paper contributes with useful insights in the duality that is economic growth and climate change. (Less)
Please use this url to cite or link to this publication:
author
Theopold, Anja Sophia LU and Ericson, Ulrika LU
supervisor
organization
course
NEKH01 20231
year
type
M2 - Bachelor Degree
subject
keywords
Economic growth, Climate change, Absolute caps on emissions, Technological change, OECD
language
English
id
9120817
date added to LUP
2024-01-22 15:40:20
date last changed
2024-01-22 15:40:20
@misc{9120817,
  abstract     = {{The matters of economic growth and climate change are both widely subjected to discussions and policymakers are under immense pressure to make decisions that enhance economic growth and stop climate change. Policies that ensure economic growth have traditionally had a negative impact on climate change and vice versa. It is therefore important to study how various policies can address the connection between the two. This paper analyses the potential effectiveness of implementing absolute caps on carbon emitting capital stock and investments in environmentally friendly technology as policy strategies to combat climate change and its implications on economic growth within the OECD. The analysis is based on a model for economic growth that considers technology to be endogenous. It is conducted through simulations in order to observe the trajectory of GDP per capita as well as accumulated pollution, which is then compared to set carbon budgets. The results show that technological advancements are crucial in order to sustain long-term economic growth. It also shows an initial period of degrowth is likely to happen. The study emphasises the welfare gains that are acquired through sustainability that could compensate for the initial losses in material well being. Further, the results show that a complete reduction in environmentally harmful capital stock is necessary. By investigating these policies, this paper contributes with useful insights in the duality that is economic growth and climate change.}},
  author       = {{Theopold, Anja Sophia and Ericson, Ulrika}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Simulating sustainable futures - Investigating the implications of CO2 emission caps on economic growth in the OECD}},
  year         = {{2023}},
}