Green consumers and environmental policy

Christos Constantatos, Christos Pargianas () and Eftichios Sartzetakis ()

Journal of Public Economic Theory, 2021, vol. 23, issue 1, 105-140

Abstract: The present paper examines how improvements in consumers' environmental awareness influence the choice between output and emission taxes, within a framework of imperfect competition and endogenous choice of abatement level. We first show that in the absence of policy intervention, there exists a level of environmental awareness beyond which welfare is decreasing as market imperfections become more prominent relative to environmental concerns. We also confirm that both output and emission taxes are welfare superior to the free‐market case. What is surprising, however, is that the welfare performance of an optimally chosen emissions tax is monotonically decreasing in consumers' environmental sensitivity, while the opposite is true for an output tax up to a certain level. At low levels of consumers' environmental awareness an emissions tax is welfare superior, but eventually, there is a level of environmental awareness beyond which an output‐tax welfare dominates an emissions tax. Therefore, an emissions tax is better suited to societies that have not yet developed high levels of environmental awareness, while societies characterized by high levels of environmental awareness should prefer an output tax.

Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://doi.org/10.1111/jpet.12469

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jpbect:v:23:y:2021:i:1:p:105-140

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1097-3923

Access Statistics for this article

Journal of Public Economic Theory is currently edited by Rabah Amir, Gareth Myles and Myrna Wooders

More articles in Journal of Public Economic Theory from Association for Public Economic Theory Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().