E-DSGE Model with Environmentally Aware Consumers

Francesco Busato (), Bruno Chiarini (), Gianluigi Cisco () and Maria Ferrara ()
Additional contact information
Francesco Busato: University of Naples Parthenope
Bruno Chiarini: University of Naples Parthenope
Gianluigi Cisco: University of Naples Parthenope
Maria Ferrara: University of Naples Parthenope

Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, 2025, vol. 11, issue 3, No 17, 1335-1386

Abstract: Abstract This paper delves into the evaluation of environmental policy, focusing on the role of green consumption, previously neglected in the literature. This article analyzes how green consumption, driven by environmental awareness, affects business cycles and the transmission mechanism of environmental policies. We augment the standard Dynamic Stochastic General Equilibrium (DSGE) model to evaluate these transmission mechanisms by including endogenous green consumption choices, time-varying environmental concerns, and an environmental concern shock. The model is estimated using Bayesian estimation for the US economy, measuring public environmental concerns based on a Climate Change News Index. Our findings indicate that (i) an environmental concern shock plays a crucial role in influencing the variances of both renewable and fossil energy consumption, thereby contributing to the decoupling of emissions and GDP; (ii) environmental concerns lead to reduced investments in emissions abatement by dirty firms under a cap-and-trade policy; (iii) green consumption driven by environmental awareness dampen macroeconomic fluctuations amplifying the negative impact on consumption after adverse exogenous shocks; (iv) over the transition to climate neutrality, sustainable goods mitigate adverse impacts on consumption.

Keywords: Carbon emissions; Environmental awareness; DSGE model; Global warming; Green consumer behavior (search for similar items in EconPapers)
JEL-codes: E32 Q51 Q54 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s40797-024-00280-8 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:spr:italej:v:11:y:2025:i:3:d:10.1007_s40797-024-00280-8

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/40797

DOI: 10.1007/s40797-024-00280-8

Access Statistics for this article

Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti is currently edited by Roberto Cellini

More articles in Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti from Springer, Società Italiana degli Economisti (Italian Economic Association) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().