Prices versus Quantities with Morally Concerned Consumers

Konferenzbeitrag

It is widely believed that an environmental tax (price regulation) and cap-and-trade (quantity regulation) are equally efficient in controlling pollution when there is no uncertainty. We show that this is not the case if some consumers (firms, local governments) are morally concerned about pollution and the pollution price is inefficiently low for political reasons. Emissions are lower and material welfare is higher with price regulation. Furthermore, quantity regulation gives rise to dysfunctional incentive and distribution effects. It shifts the burden of adjustment to the poor and discourages voluntary efforts to reduce pollution, while price regulation makes these efforts effective.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2021: Climate Economics

Classification and Topics

• Classification: Wirtschaft ; Externalities ; Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies ; Pollution Control Adoption and Costs; Distributional Effects; Employment Effects ; Environmental Economics: Government Policy
• Subject: Emissions Trading ; Carbon Tax ; Climate Change ; Prices versusQuantities ; Behavioral Industrial Organization

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Schmidt, Klaus ; Herweg, Fabian
• Event: Veröffentlichung
• (who): ZBW - Leibniz Information Centre for Economics
• (where): Kiel, Hamburg
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/242371
• Last update: 10.03.2025, 11:44 AM CET