Sustainable economic growth and pollution: an attempt at a formalized interpretation.

Summary Two remarkable results emerge from the literature on exogenous growth with pollution. It is necessary to impose ad hoc conditions to ensure the sustainability of growth (homogeneous pollution function of zero degree, green exogenous technological progress). Moreover, consumers have no active role in the search for a sustainable growth path. We then construct an applied general equilibrium model in which households have the option to consume both polluting and green goods. The trade-off between these two goods results from a preference for green goods that depends on the quality of the environment. Different variants of environmental fiscal policies are presented, depending on the intermediate objective set by the state (modification of the consumption basket or reduction of pollutant emissions associated with production). When economic growth is endogenous, sustainability can only be achieved by ad hoc assumptions similar to those imposed in exogenous growth models. We propose a model, in continuous time, in which the taste for diversity of consumers is at the origin of a qualitative endogenous growth process and their preference for green goods conditions the quality of the environment. The possibility for the state to influence the quality of the environment through consumer awareness campaigns then appears. The model, written in discrete time, does not systematically converge towards a stationary state, but its evolution can become cyclical or even chaotic for certain values of the ecological sensitivity of households. Their optimal behavior then consists in intermittently reducing their demand for polluting products, thus providing the environment with respite periods allowing it to assimilate some of the accumulated pollutants.