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Abstract
A two-sector OLG model illuminates previously unexamined intergenerational
effects of a tax that protects an environmental stock. A traded asset capitalizes the economic returns to future tax-induced environmental improvements, benefiting the current asset owners, the
old generation. Absent a transfer, the tax harms the young generation by decreasing their real wage. Future generations benefit from the tax-induced improvement in environmental stock. The principal
intergenerational conflict arising from public policy is between generations
alive at the time society imposes the policy, not between
generations alive at different times. A Pareto-improving policy can be
implemented under various political economy settings.