Economy-wide impacts of carbon emission: a post-Keynesian analysis
Book Chapter ResearchOnline@JCUAbstract
The need for government intervention and appropriate public policy to protect environment is the most agreed issue among today's economists. It is apparent that any carbon- reduction policy such as carbon tax, regulations to modify productions or changes in emission permits will involve economic costs. However, the short-term economic costs should not be looked at as disincentives and cannot be a justification for inaction. Recognising this point, the intention of this chapter is to investigate economy-wide impacts of unexpected variation in carbon emission (such as imposing a carbon reduction policy, or increased pollutants) by empirically developing and implementing a Post Keynesian open multi sector model. This chapter first will provide an overview of the environmental effects of economics growth and industrialisation with special indication of carbon emission, and then aims to recognize historical relationships between carbon emission and macroeconomic indicators. Later in the chapter, we depart from the literature on carbon emission – growth nexus and for the first time examine the reaction of key macroeconomic indicators to shocks in CO2 emission. Theoretical framework used in this study follows the Post-Keynesian theory of growth and distribution. The outcome of post-Keynesian assumption is that more investment and accelerated endogenous technological change leads to higher employment rate, increased export volumes, and consequently achieves higher economic growth. Empirical analysis in the study is conducted for Australia by using time series data covering the period of 1980-2011, and by employing Vector Autoregressive (VAR) model and impulse response functions. In the conclusion, we summarises the results and we argue about dynamic impacts of carbon and related reduction policies on the economy.
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Design a Pattern of Sustainable Growth: innovation, education, energy and environment
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ISBN/ISSN
978-606-93490-6-9
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Pages Count
34
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Publisher
ASERS Publishing
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Publisher Location
Craiova, Romania
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DOI
10.14505/despag.2014.ch9