Sustainability in closed and open economies

Abstract

This paper discusses unilaterial sustainability policies for tradable resources in closed and open economies. The effects of sustainability policies are modeled in an intertemporal, competitive framework by applying different sustainability rules which are introduced unilaterally in the domestic country. The paper shows that no sustainability rule will lead to a slower rate of extraction of the resource. Unilateral policies will lead to an 'import of sustainability'. It is also shown that the foreign country may well gain in terms of consumption and real income from such unilateral sustainability policies but not in terms of sustainability.