PRICES, POLITICS AND PERSUASION: THE CASE OF POLLUTION CONTROL AND CLEAN TECHNOLOGY ADOPTION

Wenli Cheng and Dingsheng Zhang
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Dingsheng Zhang: IAS and Economics and Management School (EMS), Wuhan University, Wuchang District, Wuhan, Hubei 430072, P. R. China3CEMA, Central University of Finance and Economics, 39 South College Road, Haidian District, Beijing 100081, P. R. China

The Singapore Economic Review (SER), 2024, vol. 69, issue 05, 1685-1695

Abstract: This paper presents three simple models to study how prices, politics and persuasion may each play a role in environmental policy-making. Our conclusions are twofold. First, in the absence of increasing returns, requiring the polluting industry to purchase pollution permits can internalize the negative externality of pollution, and the optimal price of pollution permits should increase with the disutility of pollution. Second, with increasing returns in the industry using clean technologies, it is welfare enhancing to complement the pollution permits policy with a tax-funded subsidy to the clean industry, or with a tax-funded public campaign to persuade consumers to move away from pollution-generating goods.

Keywords: Pollution permits; increasing returns; advertising (search for similar items in EconPapers)
JEL-codes: D83 H23 (search for similar items in EconPapers)
Date: 2024
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Working Paper: Prices, Politics and Persuasion: The Case of Pollution Control and Clean Technology Adoption (2013)
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DOI: 10.1142/S0217590823420018

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