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A Theory of Optimal Green Defaults

Georg Meran and Reimund Schwarze

VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy from Verein für Socialpolitik / German Economic Association

Abstract: This paper develops an analytical framework for studying the Baumol-Oates efficiency of traditional single instrument abatement policies vis-a-vis green defaults in the face of price inertia and deliberate defaulting of subpopulations. In this special case of behavioural heterogeneity command and control approaches can outperform price-based instruments and pure tax/subsidy schemes need to be adjusted in order to achieve politically desired levels of abatement. Moreover we prove that choice-preserving nudges are superior to any single-instrument policy in this case. An average marginal abatement cost rule is developed to optimise the green defaults and traditional policies of standards and prices under different degrees of market rigidity.

JEL-codes: H23 Q58 L51 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-env and nep-reg
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Related works:
Journal Article: A Theory of Optimal Green Defaults (2018) Downloads
Working Paper: A theory of optimal green defaults (2015) Downloads
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