Green Transition with Dynamic Social Preferences

Kirill Borissov and Nigar Hashimzade

No 12020, CESifo Working Paper Series from CESifo

Abstract: We examine a green transition policy involving a tax on brown goods in an economy where preferences for green consumption consist of a constant intrinsic individual component and an evolving social component. We analyse equilibrium dynamics when social preferences exert a positive externality in green consumption, creating complementarity between policy and preferences. The results show that accounting for this externality allows for a lower tax rate compared to policy ignoring the social norm effects. Furthermore, stability conditions permit gradual tax reductions or even removal along the transition path, minimising welfare losses. Thus, incorporating policy-preference interactions improves green transition policy design.

Keywords: climate change; endogenous preferences; green transition; social norms; temporary policies (search for similar items in EconPapers)
JEL-codes: H23 H31 Q58 (search for similar items in EconPapers)
Date: 2025
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Working Paper: Green Transition with Dynamic Social Preferences (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_12020

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