The Choice of Environmental Policy Instruments: Energy Efficiency and Redistribution

35 Pages Posted: 24 Mar 2010

See all articles by Alexander Haupt

Alexander Haupt

University of Plymouth - Plymouth Business School; CESifo (Center for Economic Studies and Ifo Institute)

Magdalena Stadejek

affiliation not provided to SSRN

Date Written: March 2010

Abstract

We analyse optimal environmental policies in a market that is vertically differentiated in terms of the energy efficiency of products. Considering energy taxes, subsidies to firms for investment in more eco-friendly products, and product standards, we are particularly interested in how distributional goals in addition to environmental goals shape the choice of policy instruments. Surprisingly, we find that an industry-friendly government levies an energy tax to supplement a lax product standard, but shies away from subsidies to firms. By contrast, a consumer-friendly government relies heavily on a strict product standard and in addition implements a moderate subsidy to firms, but avoids energy taxes.

Keywords: energy tax, energy efficiency standard, subsidy, vertically differentiated markets, product quality

JEL Classification: Q58, Q48, L13, L15, L50

Suggested Citation

Haupt, Alexander and Stadejek, Magdalena, The Choice of Environmental Policy Instruments: Energy Efficiency and Redistribution (March 2010). CESifo Working Paper Series No. 2986. Available at SSRN: https://ssrn.com/abstract=1573533

Alexander Haupt (Contact Author)

University of Plymouth - Plymouth Business School ( email )

Mast House
Plymouth, Devon PL4 8AA
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Magdalena Stadejek

affiliation not provided to SSRN

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