A stylised macroeconomic model incorporating green capital in the framework of Viability Theory

New Zealand’s Treasury, as illustrated by its Living Standards Framework, desires policy that not only promotes economic growth, but also sustainability and equity. This paper studies how taxation and abatement policy can work to keep an economy viable in regards to capital stocks, consumption, debt, environment and the relative factor share (a proxy for income inequality), as well as the trade-offs it faces in different levels of pollutant industry. This is done in the context of Viability Theory, a branch of mathematics suited for policy analysis. The results show that reducing an economies environmental impact is key for achieving the multi faceted growth laid out in the Living Standards Framework.