Sustainable Development: An Ambitious Target to Be Achieved?

Abstract

The aim of the present study is to substantiate the argument that funding the worldwide environmental efforts for eliminating air pollution from CO 2 emission requires transferring a huge amount of additional tax revenue from the budget of both developed and developing countries. To reach such a conclusion, a utility function for a sample of eleven countries is chosen to determine an optimal combination of direct and indirect taxes. This combination is estimated at different levels of budget constraints to determine an efficient allocation of resources. The environmental efforts under the general title sustainable development include ambitious targets, such as climate changes, environmental degradation, peace, justice and so on. This concept is defined as development that meets the needs of the present generation without undermining the ability of future generations to meet their own needs. Given the scarcity of reliable data measuring the influence of environmental and institutional changes on economic and social indices, the methodology employed in the present study is to overcome the problem arising from the complex environmental pillar of sustainable development and investigate the extent to which the economic and social pillars are financially compatible, that is if the current size of government budget can support the proposed reform bill. Since we demonstrate that such a support appears to be hardly attainable, it is redundant to include environmental issues in our analysis.