A Theory of Optimal Green Defaults
Georg Meran and
Sustainability, 2018, vol. 10, issue 8, 1-1
This paper develops an analytical framework for studying the Baumol–Oates efficiency of traditional single instrument abatement policies vis-à-vis green defaults in the face of price inertia and passive choice by subpopulations. In this special case of behavioural heterogeneity, command and control approaches can outperform price-based instruments while pure tax/subsidy schemes need to be adjusted in order to achieve politically desired levels of abatement. We also prove that choice-preserving nudges are superior to any single-instrument policy in this case. An average marginal abatement cost rule is developed to optimize the green defaults and traditional policies of standards and prices under different degrees of market rigidity.
Keywords: nudge; policy mix; behavioural heterogeneity; environmental taxes and subsidies (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
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Working Paper: A theory of optimal green defaults (2015)
Working Paper: A Theory of Optimal Green Defaults (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:10:y:2018:i:8:p:2902-:d:164007
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