Environ Econ Policy Stud https://doi.org/10.1007/s10018-018-0220-2 RESEARCH ARTICLE Discriminatory tax and subsidy on environmental behaviors Yoshinori Wada Received: 9 June 2017 / Accepted: 25 May 2018 © Society for Environmental Economics and Policy Studies and Springer Japan KK, part of Springer Nature 2018 Abstract This paper investigates the consumption tax and subsidy as an envi- ronmental policy instrument for environmentally aware consumers by applying the model of price discrimination. We discover that a higher rate of subsidy should be set for less eco-friendly consumers for the purpose of achieving socially optimal environmental qualities under positive externalities and this retrogressive subsidiza- tion differs from the current progressive subsidization in the Japanese automobile industry, and could alleviate crowding out effects on prosocial behavior. Moreover, it is revealed that the optimal policy instrument for eco-friendlier consumers shifts from a subsidy to a tax, as the level of negative externalities increases. Keywords Externalities · Environmental awareness · Incentives · Price discrimination · Pigouvian tax/subsidy JEL Classification D03 · D86 · H23 · L12 · Q58 1 Introduction This paper examines the consumption tax and subsidy on green and dirty products in the market. In our model, consumers behave differently in terms of environmental awareness, and a firm can supply a variety of products that affect
Environmental Economics and Policy Studies – Springer Journals
Published: Jun 5, 2018
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