Triggering the Green Transition; Policies for Transitional Dynamics

Rick van der Ploeg and Anthony J. Venables

No 12647, CESifo Working Paper Series from CESifo

Abstract: Using a dynamic model in which heterogenous consumers make forward-looking choices between brown and green durable goods, we establish conditions under which peer effects lead to multiple steady states. There is a critical threshold that policy needs to exceed to create a feasible transition path between states. We analyse the feasibility, speed, and cost of transition. Pigouvian policies internalising the externalities with climate damage and peer effects may be insufficient to lead to a green transition; even if they are, they may not yield net benefits.

Keywords: peer effects; multiple steady states; green transition (search for similar items in EconPapers)
JEL-codes: Q54 Q58 (search for similar items in EconPapers)
Date: 2026
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