No abstract

This article analyzes the consequences on capital accumulation and environmental quality of environmental policies …nanced by public debt. A public sector of pollution abatement is …nanced by a tax and/or public debt. We show that if the initial capital stock is high enough, the economy monotonically converges to a long-run steady state. On the contrary, when the initial capital stock is low, the economy is relegated to an environmental-poverty trap. We also explore the implications of public policies on the trap and on the long-run stable steady state. In particular, we …nd that government should decrease debt and increase pollution abatement to promote capital accumulation and environmental quality at the stable long-run steady state.JEL classi…cation: H23, H63, Q56.