Analysis on the Mechanism of Environment Improvement Policy Promoting Economic Growth

According to the endogenous economic growth theory, environment improvement policy is the means to promote economic growth. The paper sets the Hamiltonian optimization model with emission tax policy and emission abatement investment policy being endogenous. By mathematical analysis, we find that environment policy can stimulate human capital and technological advances accumulating much faster so as to offset the negative effect of the decreasing growth rate of pollution natural resources on economic growth along BGP, acquiring "double-win" performance of environment and economy under low carbon economy. By numerical simulation, we find 2 Balanced Growth Paths (BGPs) with 40-50% reduction in pollution emission, which lives up to the low-carbon promise of Copenhagen Climate Conference.