Environmental taxation: The impact of carbon tax policy commitment on technology choice and social welfare

Erica Rustico and Stanko Dimitrov

International Journal of Production Economics, 2022, vol. 243, issue C

Abstract: Motivated by multiple real-world settings, we determine a social welfare-maximizing regulator's tax policies that induce a profit-maximizing polluting firm to make green technology choices. Using a game-theoretic approach we compare the optimal tax and social welfare over two periods under two scenarios: (1) a regulator committing to a tax level for both periods at the beginning of the first period; (2) a regulator who sets the same tax at the beginning of each period without disclosing this information to the firm (i.e. the firm is not aware of the second period tax in the first period). We find that regulators can achieve a higher social welfare when two-period commitments are made. Moreover, the outcomes in the commitment policy are less sensitive to small deviations in the optimal tax level.

Keywords: Environmental taxes; Sustainability; Policy commitment; Green technologies; Environmental policy (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0925527321003042
Full text for ScienceDirect subscribers only

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:eee:proeco:v:243:y:2022:i:c:s0925527321003042

DOI: 10.1016/j.ijpe.2021.108328

Access Statistics for this article

International Journal of Production Economics is currently edited by Stefan Minner

More articles in International Journal of Production Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().