Hedonic vs Environmental Quality: Which Policy Can Help in Lowering Pollution Emissions?

Quaderni - Working Paper DSE N° 906

32 Pages Posted: 4 Oct 2013

See all articles by Andrea Mantovani

Andrea Mantovani

University of Bologna

Cecilia Vergari

University of Bologna - Department of Economics

Date Written: October 3, 2013

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 aiming to influence consumers to switch to a green good. We consider two different scenarios. When consumers are characterized by hedonic quality preferences, in this case the pollution tax is more efficient than the campaign. On the contrary, when consumers develop environmental quality preferences, there are cases in which the campaign is preferred. To sum up, while both policy instruments are effective in reducing pollution emissions, their efficiency viewed from a welfare perspective crucially depends on consumers' environmental awareness.

Keywords: Hedonic quality, environmental quality, pollution tax, relative preferences

JEL Classification: D62, L13, H13

Suggested Citation

Mantovani, Andrea and Vergari, Cecilia, Hedonic vs Environmental Quality: Which Policy Can Help in Lowering Pollution Emissions? (October 3, 2013). Quaderni - Working Paper DSE N° 906. Available at SSRN: https://ssrn.com/abstract=2335420 or http://dx.doi.org/10.2139/ssrn.2335420

Andrea Mantovani (Contact Author)

University of Bologna ( email )

Piazza Scaravilli 2
Bologna, 40126
Italy

Cecilia Vergari

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
Bologna, 40100
Italy

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