On the paradoxical case of a consumer-based environmental subsidy policy
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.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- Parry, Ian W.H., 2006. "Are the Costs of Reducing Greenhouse Gases from Passenger Vehicles Negative?," Discussion Papers dp-06-14-rev, Resources For the Future.
- 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.
- C. Lombardini-Riipinen, 2005. "Optimal Tax Policy under Environmental Quality Competition," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 32(3), pages 317-336, November.
- 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.
- 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.
- Cremer, Helmuth & Gahvari, Firouz & Ladoux, Norbert, 2001. "Environmental Taxes with Heterogeneous Consumers: An Application to Energy Consumption in France," IDEI Working Papers 127, Institut d'Économie Industrielle (IDEI), Toulouse, revised 2002.
- Cremer, Helmuth & Gahvari, Firouz & Ladoux, Norbert, 1998. "Externalities and optimal taxation," Journal of Public Economics, Elsevier, vol. 70(3), pages 343-364, December.
- José Moraga-González & Noemi Padrón-Fumero, 2002. "Environmental Policy in a Green Market," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 22(3), pages 419-447, July.
- Ida Ferrara, 2007. "Automobile quality choice under pollution control regulation," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 38(3), pages 353-372, November.
- 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.
- 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.
- 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.
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: (Zhang, Lei)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 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.