Optimal Tax Policy under Environmental Quality Competition

Lombardini-Riipinen, Chiara

doi:10.1007/s10640-005-4680-z

Cited by 92 publications

(64 citation statements)

References 23 publications

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“…Some articles address this question within the framework of vertical product differentiation. Lombardini-Riipinen (2005) introduces an emission tax in addition to an ad valorem tax and shows that the environmental tax is then equal to marginal environmental damage. This result is explained by the fact that a uniform commodity tax is equivalent to a lump-sum tax in her model, because of three fundamental assumptions: a consumer buys only one unit of the good or none; the market is fully covered; and quality increases marginal production cost.…”

Section: Introductionmentioning

confidence: 99%

Environmental Tax in a Green Market

Brécard

2010

Environ Resource Econ

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To cite this version:Dorothée Brécard. Environmental tax in a green market. 2009. EA 4272Environmental tax in a green market AbstractWe examine the impact of an emission tax in a green market characterized by consumers' environmental awareness and competition between firms for both environmental quality and product prices. The unique aspect of this model comes from the assumption that the cost for an increase in quality is fixed. We show that the emission tax improves welfare, thanks to a decline in pollution and despite an accentuation of product differentiation. The higher the marginal environmental damage is, the higher the optimal tax will be. The optimal tax, however, becomes lower than the marginal damage when the market is not too large. Finally, when marginal environmental damage is not too low, the optimal tax leads to a green product monopoly.

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Section: Introductionmentioning

confidence: 99%

Environmental Tax in a Green Market

Brécard

2010

Environ Resource Econ

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“…5 Most of the discussions about the interaction between environmental policy and price-quality discrimination have focused on quality standards, pollution charges, and combinations thereof (Fischer, 2005(Fischer, , 2010Plourde and Bardis, 1999). While some authors have considered tax/subsidy incentives (Bansal, 2008;Lombardini-Riipinen, 2005), attention has remained confined to single ad valorem instruments. As illustrated above, energy efficiency subsidies take a wider variety of forms in practice, with at least two unexplored consequences.…”

Section: Contents Lists Available At Sciencedirectmentioning

confidence: 99%

Energy efficiency subsidies with price-quality discrimination

2015

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We compare various designs of energy efficiency subsidies in a market subject to both energy-use externalities and price-quality discrimination by a monopolist. We find that differentiated subsidies can establish the social optimum. Unlike per-quality regimes, ad valorem regimes generate downstream interferences: Subsidising of the high-end good leads the monopolist to reduce the quality of the low-end good. For this reason, ad valorem differentiated rates should always decrease with energy efficiency, a result seemingly at odds with actual practice. In contrast, with per-quality differentiated subsidies, the rates can increase if the externality is large enough relative to the market share of "low" type consumers. Contrary to differentiated subsidies, what we shall call single-instrument subsidies only achieve second-best outcomes. A uniform ad valorem subsidy should have a rate higher than that needed to specifically internalise energy-use externalities. Lastly, if, as is often observed in practice, only the high-end good is to be incentivised, a per-quality regime should be preferred to an ad valorem one. An ad valorem tax on the high-end good may even be preferred to an ad valorem subsidy if the externality is small enough and low-end consumers dominate the market.

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“…6 In the first case, following most of the literature (e.g., Moraga-Gonzalez and PadronFumero, 2002;Lombardini-Riipinen, 2005;Deltas et al , 2013;Ben Elhadj and Tarola, 2015), we assume that the green good is of high quality and the polluting brown good is of low quality. In the second case, based on the observation that quite often brown goods have higher performance than green alternatives (e.g., Weatherell et al, 2003;Gupta and Ogden, 2009;Mantovani et al, 2016), we assume that the high-quality good is the one that pollutes whereas the low-quality good is green.…”

Section: Introductionmentioning

confidence: 99%

“…The papers by Moraga-Gonzalez and Padron-Fumero (2002) and Lombardini-Riipinen (2005) are useful references. In the former, the authors compare some frequently used environmental policies: emissions standard, ad valorem tax and technology subsidization.…”

Section: Introductionmentioning

confidence: 99%

Environmental vs hedonic quality: which policy can help in lowering pollution emissions?

Mantovani¹,

Vergari²

2017

Envir. Dev. Econ.

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ABSTRACT. In this paper we compare two policy instruments that can be adopted to curb carbon emissions. The first is a conventional pollution tax, the second is an environmental campaign raising consumers' awareness about the relative impact of their consumption choices. The comparison is carried out in two different scenarios, depending on whether consumers' aprioristic preferences are such that they value the environmental attribute of a product (environmental quality) or its pure performance (hedonic quality) . In the case of environmental quality, the campaign is preferred under some specific conditions based on consumer heterogeneity, cost-effective analysis, and pollution level. On the contrary, the pollution tax is always preferred in the case of hedonic quality. Therefore, we show that the relative efficiency of the two policy instruments crucially depends on consumers' initial concern for the environment, which may vary across countries due to socio-economic conditions.

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Optimal Tax Policy under Environmental Quality Competition

Cited by 92 publications

References 23 publications

Environmental Tax in a Green Market

Environmental Tax in a Green Market

Energy efficiency subsidies with price-quality discrimination

Environmental vs hedonic quality: which policy can help in lowering pollution emissions?

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