Sustainability Economics, Resource Efficiency, and the Green New Deal

Abstract

The chapter addresses major sustainability issues within a simple general framework. It studies energy scarcity and endogenous capital formation in the long and medium run. It is shown that energy efficiency depends on the sectoral structure of the economy. Accordingly, structural change is an efficient way to promote both efficiency and sustainable development. The results for the medium run imply that the current crises offer a scope for the greening of the economy, provided that policy increases productivity through trust-building. However, there are major differences between economic recovery and sustainability so that the proposals of the Green New Deal have to be evaluated with care.

This paper has been previously published in International Economics and Economic Policy, Special Issue on “International Economics of Resources and Resource Policy”, Volume 7, Numbers 2–3/August 2010.

Appendix

Calculation of B

$$ \begin{array}{lll}{B_j}(t) = \kappa \cdot {K_j}(t) - \kappa \cdot {K_j}{(t)^2}/{\overline K_j}(t) + 1 \hfill \hskip -45pt\\{\overline B_j}:\frac{{\partial {B_j}(t)}}{{\partial {K_j}(t)}} = 0 \hfill \\\kappa = 2 \cdot \kappa \cdot {K_j}(t)/{\overline K_j}(t) \hfill \\{K_j}(t) = 2 \cdot {K_j}(t) \hfill \\{K_j}(t) = {\overline K_j}(t)/2 \hfill \\\hfill \\\end{array} $$

Inserting in the logistic function gives

$$ \begin{array}{lll} {\overline B_j}(t) = \kappa \cdot {\overline K_j}(t)/2\left[ {1 - {{\overline K }_j}(t)/2{{\overline K }_j}(t)} \right] + 1 \hskip -12.4pc \cr = \kappa \cdot {\overline K_j}(t)/2 \cdot 1/2 + 1 \cr= \kappa \cdot {\overline K_j}(t)/4 + 1 \hfill \\\hfill \\\end{array} $$

so that ${\overline K_j}(t) = 4\left( {{{\overline B }_j} - 1} \right)/\kappa$ if ${\underline K_j}(t) = 0$ and ${\overline K_j}(t) - {\underline K_j}(t) = 4\left( {{{\overline B }_j} - 1} \right)/\kappa$ if ${\underline K_j}(t) > 0$ as used in the main text.