Abstract
In recent years, many scholars have shown an increasing interest in the problem of pollution (carbon emission) in the endogenous growth but less concern about the interactions of polluting activities between two economy systems. This study explains the effects of carbon emission on the optimal balanced growth path by establishing an endogenous growth model involving exhaustible resources, human capital, physical capital, and labor time under one economy and a similar system involving two economic systems. The second system is used to analyze the interactions of polluting activities across the two economic systems that it covers. The results show that the negative externality (carbon emission) caused by one economy will bring remarkable adverse impacts on the optimal resource extraction and growth rates of other economies. If the people in one economy pay greater attention to the environmental problem (carbon emission), its own resource input will be lowered to reduce carbon emissions, but carbon emissions of another economy will be increased simultaneously to accelerate the economic growth. That is why carbon emission is one of the most challenging issues in global governance. Therefore, the global environmental pollution control needs the help of the cross-regional governance mechanism.
Highlights
The environment is the material basis and constraint to human survival
Proposition 1: When carbon emission and its disutility are considered in the endogenous growth model, gA and gY are greater than zero all the time and gQ(gR)
The result in this model shows that the economic growth depends more on the human capital input and less on the resource extraction when the disutility of the carbon concentration is considered
Summary
The environment is the material basis and constraint to human survival. Man-made environmental problems came up with population growth and development. Carbon Emission and Endogenous Growth the first literature to introduce the non-renewable resource into the field of a neoclassical growth model. A number of authors, thereafter, began to introduce flow pollution problems caused by non-renewable resources into the endogenous growth model. There are many scholars who have explored economic growth and carbon emissions, none of them considers the possibility of the interaction of polluting activities between the two economic systems, which is especially important when facing the problems of global pollution. This study combines ideas from the areas of endogenous growth, environmental economics, and economic theory of nonrenewable resources to examine how the conventional results from growth models with carbon emissions may be affected by the inclusion of the non-renewable resources. The conclusions and remarks are drawn in section Conclusions, while Appendices A–C are at the end of this article
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