Chapter 9 Distributional and macroeconomic aspects of environmental policy

The achievement of an efficient balance between the economic system and the environment is just one of many societal objectives. How environmental policy affects these other objectives is important because these impacts may serve to constrain the set of politically feasible policies, may recommend some approaches over others or may provide guidance as to the most appropriate timing of policy implementation. Two effects of environmental policy have been discussed in the chapter: distributional effects and macroeconomic effects. The former concerns how the costs and benefits of environmental policy are distributed among socioeconomic groups and among geographic regions; the latter concerns the impact of environmental policy on important national aggregates such as inflation, unemployment, and productivity. The chapter examines the theoretical models that serve to identify the channels of influence, the data which provide the raw material for the estimates and the methods used to quantify the impacts. The objective is to convey a sense of the magnitude of the impacts along with an appreciation for the reliability of these estimates for policy purposes. Finally, the chapter discusses the policies that have triggered the effects being estimated.