Environmental policy in a green market

José Luis Moraga-González*, Noemi Padrón-Fumero

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

This paper studies the impact of some frequently-used environmental policies in a duopolistic market where purchasers are willing to pay more for less polluting goods. When consumers differ in their environmental awareness, a cleaner and a dirtier variant coexist in equilibrium. The higher the average willingness-to-pay for the good, the lower are variants' unit emissions but the higher are industrial aggregate effluents. A maximum unit emission standard reduces unit emissions of both variants, but boosts firms' sales and consequently increases industrial aggregate emissions. As a result, social welfare may be reduced. We also explore the effects of technological subsidies and product charges, including differentiation of charges.

Original languageEnglish
Pages (from-to)419-447
Number of pages29
JournalEnvironmental and Resource Economics
Volume22
Issue number3
DOIs
Publication statusPublished - 2002

Keywords

  • Environmentalists
  • Environmentally differentiated duopoly
  • Green consumption
  • Green market
  • Product charges
  • Subsidies
  • Unit emission standards

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