Is Environmentalism the Right Strategy to Decarbonize the World?

Marini, Marco A. and Tarola, Ornella and Thisse, Jacques-Francois (2021): Is Environmentalism the Right Strategy to Decarbonize the World?

Abstract

We study how the supply of environmentalism, which is defined by psychic benefits (costs) associated with the purchase of high-environmental (low-environmental) qualities, affects the way firms choose their prices and products and the ensuing consequences for the global level of pollution. Contrary to general belief, a high supply of environmentalism does not necessarily give rise to a better environmental outcome because it endows the green firms with more market power which they use to charge higher prices. Nonetheless, environmentalism can be used to effectively complement more traditional policy instruments such as a minimum environmental standard.

• Item Type: MPRA Paper
• Language: English
• Keywords: environmentalism, psychic costs and benefits, vertical product differentiation, environmental policy
• Subjects: D - Microeconomics > D0 - General; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L22 - Firm Organization and Market Structure; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L23 - Organization of Production; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q52 - Pollution Control Adoption and Costs ; Distributional Effects ; Employment Effects; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q56 - Environment and Development ; Environment and Trade ; Sustainability ; Environmental Accounts and Accounting ; Environmental Equity ; Population Growth

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