This paper reviews dynamic general equilibrium models in order to collect insights on the interaction between economic growth and environmental issues. The authors discuss the Ramsey model and extend it for natural resource inputs and pollution, as well as for endogenous technical change. Green growth becomes within reach if there is good substitution, a clean backstop technology, a small share of natural resources in gross domestic product, and/or green directed technical change.
Questions about the ultimate size of mineral and energy resource endowments and the degree of fiscal prudence which should be exercised by countries engaged in resource extraction have become central for many developing countries during the recent resource boom.
When a policy is evaluated, the rate at which future costs and benefits should be discounted depends upon their maturity and risk profile.