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Optimal consumption and the environment Choosing between ‘clean’ and ‘dirty’ goods

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  • Domenico Scalera

Abstract

In this paper, a model with heterogeneous consumption goods is presented. Consumers are assumed to choose between two different consumption goods, characterized by a different impact on the environment. This implies that, in a decentralized economy, government can sustain the social optimum by setting two Pigouvian taxes: one on production as a whole and the other on dirty consumption acting as an incentive in favour of clean consumption. In accordance with the previous literature, a trade-off between a clean environment and economic activity evolves. However, this trade-off is now mitigated by the additional taxation on polluting consumption which allows the control of pollution stock evolution through the substitution between clean and dirty commodities. Copyright Kluwer Academic Publishers 1996

Suggested Citation

  • Domenico Scalera, 1996. "Optimal consumption and the environment Choosing between ‘clean’ and ‘dirty’ goods," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 7(4), pages 375-389, June.
    • Handle: RePEc:kap:enreec:v:7:y:1996:i:4:p:375-389
    DOI: 10.1007/BF00369625
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    References listed on IDEAS

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    1. Forster, Bruce A., 1980. "Optimal energy use in a polluted environment," Journal of Environmental Economics and Management, Elsevier, vol. 7(4), pages 321-333, December.
    2. Heal, Geoffrey M., 1993. "The optimal use of exhaustible resources," Handbook of Natural Resource and Energy Economics, in: A. V. Kneese† & J. L. Sweeney (ed.), Handbook of Natural Resource and Energy Economics, edition 1, volume 3, chapter 18, pages 855-880, Elsevier.
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    8. Nordhaus, William, 1982. "How Fast Should We Graze the Global Commons?," American Economic Review, American Economic Association, vol. 72(2), pages 242-246, May.
    9. A. Lans Bovenberg & Frederick van der Ploeg, 2002. "Environmental Policy, Public Finance and the Labour Market in a Second-Best World," Chapters, in: Lawrence H. Goulder (ed.), Environmental Policy Making in Economies with Prior Tax Distortions, chapter 6, pages 112-153, Edward Elgar Publishing.
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    Cited by:

    1. Camille Hainnaux & Thomas Seegmuller, 2022. "Pollution versus Inequality: Tradeoffs for Fiscal Policy," Working Papers hal-03792493, HAL.
    2. Alejandro Herrera Catalino & Magdalena Lizardo, 2004. "Agriculture, Environmental Services and Agro-Tourism in the Dominican Republic," The Electronic Journal of Agricultural and Development Economics, Food and Agriculture Organization of the United Nations, vol. 1(1), pages 87-116.
    3. Carlo Orecchia & Maria Elisabetta Tessitore, 2011. "Economic Growth and the Environment with Clean and Dirty Consumption," Working Papers 2011.57, Fondazione Eni Enrico Mattei.

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