Analysis of the Social Welfare Effect of Environmental Regulation Policy Based on a Market Structure Perspective and Consumer

Lijie Wang and Jianjun Lu
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Lijie Wang: College of Economics and Management, China Agricultural University, Beijing 100083, China
Jianjun Lu: College of Economics and Management, China Agricultural University, Beijing 100083, China

Sustainability, 2019, vol. 12, issue 1, 1-15

Abstract: With the implementation of regulatory policies, some new problems are emerging, such as uneven governance effects, large differences in economic growth, and social welfare inequalities. In order to promote the sustainable development of both the economy and the environment, it is necessary to provide theoretical explanations for the above phenomena. Thus, this paper constructs a theoretical model of social welfare effects based on the Cournot model. Additionally, the scenario analysis method is used to analyze the social welfare effects of environmental control policies from the perspective of market structure and consumer preferences. The findings of the scenario analysis are as follows: (1) the social welfare effect of environmental subsidy policy is greater than the social welfare effect of environmental tax policy when the absolute difference between the external value of environmentally friendly goods and non-environmental goods is less than 7.4 units and (2) the implementation of environmental subsidy policies or environmental tax policies will improve social welfare when the market structure is a completely competitive market and when both of the externalities of environmentally friendly commodities and non-environmental commodities are not the same at intervals (0, 0.335) and (−0.335, 0). We conclude that (1) the government should consider externalities, market powers, and consumer preferences when implementing environmental regulation policies and (2) the government can achieve a trend toward the development of environmentally friendly goods by guiding consumer preferences and harnessing market power.

Keywords: environmental regulation policy; market structures; consumer preferences; social welfare (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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