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Environmental policy and the economic downturn

Bowen, Alex and Stern, Nicholas (2010) Environmental policy and the economic downturn. Oxford Review of Economic Policy, 26 (2). pp. 137-163. ISSN 0266-903X

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Abstract

This paper considers how environmental policies should respond to macroeconomic downturns. It first explores the implications of the global economic downturn of 2008–9 for environmental policies, focusing in particular on the example of action against climate change. The arguments for and against activist fiscal policies in general are then reviewed, and the case made that a demand-induced downturn provides a very good opportunity to undertake a necessary step change in the public spending component of environmental policies and to start working through a backlog of public investment to improve the environment. Fiscal policy should be used to improve the allocation of resources across time and space. Recent fiscal stimuli are considered in the light of this discussion. It is also argued that there is little cause to delay the introduction of price signals to internalize environmental externalities. But the levels at which such signals should be set requires careful analysis; changes over the business cycle may be warranted, depending on the nature of the environmental externality and the cause(s) of the business cycle in question.

Item Type: Article
Official URL: http://oxrep.oxfordjournals.org/
Additional Information: © 2010 Oxford University Press
Library of Congress subject classification: G Geography. Anthropology. Recreation > GE Environmental Sciences
H Social Sciences > HC Economic History and Conditions
J Political Science > JA Political science (General)
Journal of Economic Literature Classification System: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy Formation, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook > E62 - Fiscal Policy; Public Expenditures, Investment, and Finance; Taxation
E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy Formation, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook > E65 - Studies of Particular Policy Episodes
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H25 - Business Taxes and Subsidies
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q54 - Climate; Natural Disasters
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q58 - Government Policy
Sets: Research centres and groups > Grantham Research Institute on Climate Change and the Environment
Research centres and groups > India Observatory
Collections > Economists Online
Research centres and groups > Asia Research Centre
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 12 Apr 2011 09:58
URL: http://eprints.lse.ac.uk/35255/

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