Chapter 2: Trade-Off Between Environmental Emission and Consumption and Some Related Issues: An Optimal Growth-Theoretic Analysis

The conflict between economic growth and sustainable development is foregone and there is prodigious literature examining the nature and causes of such trade-off. Keeping with this dispensation, the current chapter examines the dynamics of such trade-off in Ramsey–Cass–Koopmans (R–C–K) optimal growth-theoretic lines. The model developed in the chapter departs from the fundamental feature of R–C–K framework in as much as the capital is considered on a broader spectrum having its marginal productivity being increasing in nature and it considers a centralised economy with the planner maximising discounted utility over per capita consumption (private good) and pollution (public bad) over the infinite horizon of time. The study reveals potential trade-off between consumption and environmental emission quiet emphatically for the developed, developing and less developed countries, in both single equilibrium and multiple equilibrium cases. Besides, the study examines the impact of rise in population growth and fuel price on the steady-state equilibrium with respect to per capita capital, relative intensity of energy usage, emission and consumption using comparative static exercise.