Endogenous choice of corporate social responsibility and emissions tax: What impact do green consumers have on economic welfare?

This paper develops a corporate social responsibility (CSR) model with three CSR scenarios—environmental CSR, consumer-environment-friendly CSR, and consumer-friendly CSR—under a precommitted emissions tax policy in a monopoly market. This paper also analyzes the effects of CSR behavior on firm profit, emission reduction investment, and social welfare. Furthermore, this paper explores two major research questions: (1) What impact do green consumers have on firm profit, total emissions, and social welfare? (2) Which of the three alternative scenarios does the firm/government prefer? The main results are twofold. (i) From the perspective of profit maximization, among the three scenarios, the firm always prefers environmental CSR; in contrast, consumer-environment-friendly CSR yields greater social welfare than the other two scenarios. (ii) In each scenario, higher CSR results in greater emissions. Moreover, in sharp contrast to common belief, the results indicate that green consumers generate greater emissions.