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Environmental Information Provision as a Public Policy Instrument

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  • Emmanuel Petrakis

    ()
    (Department of Economics, University of Crete, Greece)

  • Eftichios S. Sartzetakis

    (Department of Accounting and Finance, University of Macedonia)

  • Anastasios Xepapadeas

    ()
    (Department of Economics, University of Crete, Greece)

Abstract

The present paper examines the use of information provision financed by the revenues of existing environmental taxation in the case of products that generate damages to the consumers of these products as well as an environmental externality. We show that when information provision is used alone it is welfare dominated by taxation, except if information can be provided costesly. The zero cost case, although not realistic, indicates the potential of information provision and leads us to examine the combined use of the two policies. We find that a policy regime that combines information provision and taxation dominates taxation in terms of welfare. This is because a uniform taxation levies a heavier than the optimal burden on the informed consumers and allows the uninformed consumer to partially free ride on the informed consumers voluntary actions. The combination of policies regime reduces this problem, allocating the effort of reducing the consumption of the environmentally damaging good more efficiently among consumers. Therefore, recycling of environmental tax revenues to finance information provision improves welfare.

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File URL: http://economics.soc.uoc.gr/wpa/docs/EnvInf(PSX)16-11-04.pdf
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Bibliographic Info

Paper provided by University of Crete, Department of Economics in its series Working Papers with number 0414.

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Length: 31 pages
Date of creation: 00 Aug 2004
Date of revision:
Handle: RePEc:crt:wpaper:0414

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Cited by:
  1. Lehmann, Paul, 2008. "Using a policy mix for pollution control: A review of economic literature," UFZ Discussion Papers 4/2008, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).
  2. Andrea Podhorsky, 2009. "Environmental Labeling," Working Papers 2009_3, York University, Department of Economics.
  3. Sengupta, Aditi, 2012. "Investment in cleaner technology and signaling distortions in a market with green consumers," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 468-480.
  4. Kallbekken, Steffen & Westskog, Hege & Mideksa, Torben K., 2010. "Appeals to social norms as policy instruments to address consumption externalities," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 39(4), pages 447-454, August.
  5. Aditi Sengupta, 2010. "Signaling environmental quality to green consumers and the incentive to invest in cleaner technology: Effect of environmental regulation," Departmental Working Papers 1001, Southern Methodist University, Department of Economics.
  6. Gil-Moltó, Maria José & Varvarigos, Dimitrios, 2013. "Emission taxes and the adoption of cleaner technologies: The case of environmentally conscious consumers," Resource and Energy Economics, Elsevier, vol. 35(4), pages 486-504.
  7. Sartzetakis, Eftichis & Xepapadeas, Anastasios & Petrakis, Emmanuel, 2008. "The role of information provision as a policy instrument to supplement environmental taxes: Empowering consumers to choose optimally," MPRA Paper 12083, University Library of Munich, Germany.
  8. Jesse Matheson, 2011. "Prices and social behavior: A study of adult smoking in Canadian Aboriginal communities," Discussion Papers in Economics 11/50, Department of Economics, University of Leicester, revised Dec 2012.
  9. Lucie Bottega & Jenny De Freitas, 2009. "Public, private and nonprofit regulation for environmental quality," DEA Working Papers 33, Universitat de les Illes Balears, Departament d'Economía Aplicada.
  10. Aditi Sengupta, 2012. "Competitive Investment in Clean Technology and Uninformed Green Consumers," Auburn Economics Working Paper Series auwp2012-08, Department of Economics, Auburn University.

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