IDEAS home Printed from https://ideas.repec.org/a/eee/ecmode/v27y2010i1p159-164.html
   My bibliography  Save this article

On the paradoxical case of a consumer-based environmental subsidy policy

Author

Listed:
  • Toshimitsu, Tsuyoshi

Abstract

We apply an environmentally differentiated duopoly model to the analysis of environmental policy involving consumer subsidies based on the emission levels of the products consumers purchase. More specifically, we consider the environmental and welfare effects of subsidizing consumers who purchase environmentally friendly goods in the case of a partially covered market with a Cournot duopoly. We show that, paradoxically, the subsidy policy degrades the environment, and that the optimal policy depends on the degree of marginal social valuation of environmental damage. That is, if the marginal social valuation of environmental damage is larger than a certain value, a consumer-based environmental subsidy policy is not socially optimal.

Suggested Citation

  • Toshimitsu, Tsuyoshi, 2010. "On the paradoxical case of a consumer-based environmental subsidy policy," Economic Modelling, Elsevier, vol. 27(1), pages 159-164, January.
  • Handle: RePEc:eee:ecmode:v:27:y:2010:i:1:p:159-164
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0264-9993(09)00144-8
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Arora, Seema & Gangopadhyay, Shubhashis, 1995. "Toward a theoretical model of voluntary overcompliance," Journal of Economic Behavior & Organization, Elsevier, vol. 28(3), pages 289-309, December.
    2. Bansal, Sangeeta & Gangopadhyay, Shubhashis, 2003. "Tax/subsidy policies in the presence of environmentally aware consumers," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 333-355, March.
    3. Parry, Ian W.H., 2007. "Are the costs of reducing greenhouse gases from passenger vehicles negative?," Journal of Urban Economics, Elsevier, vol. 62(2), pages 273-293, September.
    4. José Moraga-González & Noemi Padrón-Fumero, 2002. "Environmental Policy in a Green Market," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 22(3), pages 419-447, July.
    5. Cremer, Helmuth & Gahvari, Firouz & Ladoux, Norbert, 1998. "Externalities and optimal taxation," Journal of Public Economics, Elsevier, vol. 70(3), pages 343-364, December.
    6. Cremer, Helmuth & Gahvari, Firouz & Ladoux, Norbert, 2003. "Environmental taxes with heterogeneous consumers: an application to energy consumption in France," Journal of Public Economics, Elsevier, vol. 87(12), pages 2791-2815, December.
    7. Ida Ferrara, 2007. "Automobile quality choice under pollution control regulation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 38(3), pages 353-372, November.
    8. Proost, Stef & Van Dender, Kurt, 2001. "The welfare impacts of alternative policies to address atmospheric pollution in urban road transport," Regional Science and Urban Economics, Elsevier, vol. 31(4), pages 383-411, July.
    9. Bansal, Sangeeta, 2008. "Choice and design of regulatory instruments in the presence of green consumers," Resource and Energy Economics, Elsevier, vol. 30(3), pages 345-368, August.
    10. C. Lombardini-Riipinen, 2005. "Optimal Tax Policy under Environmental Quality Competition," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 32(3), pages 317-336, November.
    11. Tsuyoshi Toshimitsu, 2008. "On Environmental Subsidy/Tax Policy with Heterogeneous Consumers: An Application of an Environmentally Differentiated Duopoly Model," Discussion Paper Series 38, School of Economics, Kwansei Gakuin University, revised Apr 2008.
    12. Kahn, Matthew E., 2007. "Do greens drive Hummers or hybrids? Environmental ideology as a determinant of consumer choice," Journal of Environmental Economics and Management, Elsevier, vol. 54(2), pages 129-145, September.
    Full references (including those not matched with items on IDEAS)

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:27:y:2010:i:1:p:159-164. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/inca/30411 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.