Putting a price tag on emissions and resources: An economist’s view on policy interventions for intergenerational fairness and sustainability

Gunter Stephan

doi:10.14512/gaia.29.4.3

Abstract

Modern economies are confronted with major problems: the exhaustion of natural resources, the degradation of the environment and the financing of the needs of an aging population ‐ all challenge the welfare of both present and future generations. This paper discusses a proposal which is designed to bring about a double dividend. On the one hand, a virgin resource tax could stimulate the reduction of natural resource use by making sustainable technologies economically profitable. On the other hand, it could provide a way to finance the pension system.

Highlights

Equity and efficiency are key pillars of sustainability. This fol- This immediately raises an important question: under what conlows from the Brundtland report (WCED 1987), which states: ditions would the present generation be willing to support the tranthe present generation has to use scarce resources efficiently in sition to a more sustainable economy? Environmental economists satisfying its needs and in doing so it should not harm the future would typically argue that improved environmental quality has the generations’ welfare.1. To express it in more technical terms: all features of a public good, the incentive to voluntarily ingenerations should be treated symmetrically in the sense that the vest in a sustainable economy will be low unless a high degree of level of welfare of each generation has to be at least equal to that intergenerational altruism prevails, that is, if the welfare of the enjoyed by the previous generation
Therecan be achieved only if the present generation significantly invests by the main message of this paper is that the intergenerational in the future environment by reducing both emissions and resource fairness issue could be overcome by a tax on virgin resources comuse
The Swedish Environmental Protection Agency, among others, argues that taxes on virgin natural resources should be given serious consideration (SEPA 2002) because they may be compatible with so-called integrated product policies (IPP), which aim at encouraging the diffusion of environmental management techniques along the entire supply chain of a product

Summary

Putting a price tag on emissions and resources

An economist’s view on policy interventions for intergenerational fairness and sustainability. Modern economies are confronted with major problems: the exhaustion of natural resources, the degradation of the environment and the financing of the needs of an aging population – all challenge the welfare of both present and future generations. This paper discusses a proposal which is designed to bring about a double dividend. A virgin resource tax could stimulate the reduction of natural resource use by making sustainable technologies economically profitable. It could provide a way to finance the pension system

Gunter Stephan

Findings

Conclusions