Optimal Tax Policy under Environmental Quality Competition
This paper studies the socially optimal emission and commodity tax policy when consumers are willing to pay a price-premium for environmentally friendlier variants of a commodity vertically differentiated in environmental quality. The first-best levels of quality can be obtained by a combination of a uniform ad valorem tax and an emission tax (or a subsidy for buying green products). The first-best emission tax is higher than the social valuation of the positive externality associated with average environmental quality. Regardless of environmentally conscious consumers, if only one instrument is available, the second-best emission tax is equal to the social valuation of the positive externality associated with average environmental quality. A uniform ad valorem tax increases welfare only if the social valuation of the positive externality associated with average environmental quality is low enough. Copyright Springer 2005
Volume (Year): 32 (2005)
Issue (Month): 3 (November)
|Contact details of provider:|| Web page: http://www.springer.com|
Postal:c/o EAERE Secretariat - Fondazione Eni Enrico Mattei - Isola di San Giorgio Maggiore 8, I-30124 Venice, Italy
Web page: http://www.eaere.org/
More information through EDIRC
|Order Information:||Web: http://www.springer.com/economics/environmental/journal/10640/PS2|
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.:
- G. Ecchia & L. Lambertini, 1998. "Market Coverage and the Existence of Equilibrium in a Vertically Differentiated Duopoly," Working Papers 311, Dipartimento Scienze Economiche, Universita' di Bologna.
- Michael Kuhn, . "Low Quality Leadership in Vertically Differentiated Duopoly," Discussion Papers 00/38, Department of Economics, University of York.
When requesting a correction, please mention this item's handle: RePEc:kap:enreec:v:32:y:2005:i:3:p:317-336. 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: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.