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The Role of Information Provision as a Policy Instrument to Supplement Environmental Taxes: Empowering Consumers to Choose Optimally

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Author Info

  • Eftichios S. Sartzetakis

    (University of Macedonia)

  • Anastasios Xepapadeas

    (Athens University of Economics and Business and Beijer Fellow)

  • Emmanuel Petrakis

    (University of Crete)

Abstract

The present paper examines, within a dynamic framework, the use of information provision as a policy instrument to supplement environmental taxation. We assume that at least a fraction of consumers do not posses the required information to make the optimal choices, and that their behavior at each time period depends on the accumulated stock of information. We show that, as the accumulated stock of information provision increases, both the optimal level of information provided at each period of time and the optimal tax rate decline over time. Our results provide strong evidence in support of information campaigns as a policy instrument to supplement traditional environmental policies. Information provision can shift the demand towards environmentally friendly products over time and thus, reduce the required level of the tax rate.

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Bibliographic Info

Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2009.46.

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Date of creation: Jun 2009
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Handle: RePEc:fem:femwpa:2009.46

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Keywords: Information Provision; Environmental Taxation;

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References

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  1. Petrakis Emmanuel & Sartzetakis Eftichios Sophocles & Xepapadeas Anastasios, 2005. "Environmental Information Provision as a Public Policy Instrument," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-33, November.
  2. Anthony Heyes and John Maxwell, 2003. "Private vs. Public Regulation: Political Economy of the International Environment," Royal Holloway, University of London: Discussion Papers in Economics, Department of Economics, Royal Holloway University of London 03/5, Department of Economics, Royal Holloway University of London, revised Dec 2003.
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  6. Kennedy, P. & Laplante, B. & Maxwell, J., 1990. "Pollution Policy: The Role of Publicly Provided Information," Papers, Laval - Recherche en Energie 9021, Laval - Recherche en Energie.
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Cited by:
  1. 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.
  2. Aditi Sengupta, 2011. "Investment in Cleaner Technology and Signaling Distortions in a Market with Green Consumers," Auburn Economics Working Paper Series, Department of Economics, Auburn University auwp2011-10, Department of Economics, Auburn University.
  3. Aditi Sengupta, 2012. "Competitive Investment in Clean Technology and Uninformed Green Consumers," Auburn Economics Working Paper Series, Department of Economics, Auburn University auwp2012-08, Department of Economics, Auburn University.
  4. Christopher Jeffords, 2014. "Preference-directed regulation when ethical environmental policy choices are formed with limited information," Empirical Economics, Springer, Springer, vol. 46(2), pages 573-606, March.

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