Optimal consumption and the environment Choosing between ‘clean’ and ‘dirty’ goods

Domenico Scalera

Environmental & Resource Economics, 1996, vol. 7, issue 4, 375-389

Abstract: In this paper, a model with heterogeneous consumption goods is presented. Consumers are assumed to choose between two different consumption goods, characterized by a different impact on the environment. This implies that, in a decentralized economy, government can sustain the social optimum by setting two Pigouvian taxes: one on production as a whole and the other on dirty consumption acting as an incentive in favour of clean consumption. In accordance with the previous literature, a trade-off between a clean environment and economic activity evolves. However, this trade-off is now mitigated by the additional taxation on polluting consumption which allows the control of pollution stock evolution through the substitution between clean and dirty commodities. Copyright Kluwer Academic Publishers 1996

Keywords: pollution control; Pigouvian taxation; heterogeneous consumption goods (search for similar items in EconPapers)
Date: 1996
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/BF00369625

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