Environmental Taxation for a Sustainable Future: Perspectives from Environmental Macroeconomics
17 Pages Posted: 30 Oct 2013
Date Written: October 25, 2013
The aim of this paper is to demonstrate the significant differences that would emerge in policy formulation, when environmental capital is explicitly accounted for in macroeconomic analyses. These differences are illustrated with reference to the Australian economy. The main analytic frameworks considered are the aggregate demand and supply framework and the factor utilisation function – which traditionally deals with labour and manufactured capital. The development of a three-factor utilisation function in terms of labour, manufactured capital, and environmental capital enables the display of mistaken notions of economic performance. That is in the absence of environmental capital; policy makers over-state the performance of labour and manufactured capital. As illustrated in the paper, the implication of developing and applying environmental-macroeconomics framework for formulating sustainable development policies is significant.
Keywords: Macroeconomics, Aggregate Factor Income Distribution, Fiscal Policy, Environment and Development, Sustainability
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