In this paper, we analyze whether the development of a growing economy could be impeded if a binding climate agreement were signed at the international level. Specifically, we study, in the case of a developing country, the initial momentum for development in the presence of binding emission standards. To this end, we enhance the Big Push static general equilibrium model, developed by Murphy, Shleifer, and Vishny (1989) by introducing both exogeneous emission standards and abatement investments with fixed costs. Our findings show that in the case of a developing country this model could lead to two equilibria : a “bad” equilibrium and a “good” equilibrium. The “bad” equilibrium is a situation in which the development is brought to a halt because of stringent emission standards. The “good” equilibrium, or what we call the “Environmental” Big Push, corresponds to a situation in which a given number of modern sectors have an incentive both to modernize production while investing in new abatement technology.
