The Adverse Effects of Environmental Policy in Green Markets

Jose Moraga-Gonzalez and Noemi Padrón-Fumero
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Noemi Padrón-Fumero: University Pompeu Fabra
Authors registered in the RePEc Author Service: Noemi Padron Fumero ()

No 1998-11, CIE Discussion Papers from University of Copenhagen. Department of Economics. Centre for Industrial Economics

Abstract: We model green markets in which purchasers, either firms or consumers, have higher willingness-to-pay for less polluting goods. The effectiveness of pollution reduction policies is examined in a duopoly setting. We show that duopolists´ strategic behaviour may increase pollution levels. Maximum emission standards, commonly used in green markets, improve the environmental features of products. Nonetheless, overall pollution levels will rise because government regulation also affects market shares and boosts firms´ sales. Consequently, social welfare may be reduced. We also explore the effects of technological subsidies and product charges, including differentiation of charges.

Keywords: emission standards; subsidies; product charges; vertically differentiated duopoly (search for similar items in EconPapers)
JEL-codes: L52 Q28 (search for similar items in EconPapers)
Pages: 11 pages
Date: 1998-09
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Citations: View citations in EconPapers (2)

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