Abstract
AbstractThis paper studies how interaction between economic decision-making and environmental awareness affects US business cycle and GHG emissions in a two-sector DSGE model. We emphasize the mechanisms that relate carbon emissions dynamics, consumer behavior, and environmental awareness in a framework incorporating two classes of goods (i.e., “clean” and “dirty”). This paper offers three main results. First, green consumption preferences play a key role in emissions reduction when they internalize emissions concentrations. Second, a green preference shock is the second source of fluctuation in many sectoral variables and stabilizes the business cycle. Third, a pollutant supply shock leads to sustainable consumption procyclicality documented in US data, only if households are environmentally aware.
Publisher
Springer Science and Business Media LLC
Subject
Management, Monitoring, Policy and Law,Economics and Econometrics,Geography, Planning and Development
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