How to Turn an Industry Green: Taxes versus Subsidies

Arbeitspapier

Environmental policies frequently target the ratio of dirty to green output within the same industry. To achieve such targets the green sector may be subsidised or the dirty sector be taxed. This paper shows that in a monopolistic competition setting the two policy instruments have different welfare effects. For a strong green policy (a severe reduction of the dirty sector) a tax is the dominant instrument. For moderate policy targets, a subsidy will be superior (inferior) if the initial situation features a large (small) share of dirty output. These findings have implications for policies such as the Californian Zero Emission Bill or the EU Action Plan for Renewable Energy Sources.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: DIW Discussion Papers ; No. 341

Classification and Topics

• Classification: Wirtschaft ; Renewable Resources and Conservation: Government Policy ; Oligopoly and Other Imperfect Markets
• Subject: Environmental policy ; Monopolistic competition ; Taxes ; Subsidies ; Welfare ; Zero Emission Bill ; Umweltabgabe ; Umweltschutz ; Subvention ; Mehr-Sektoren-Modell ; Monopolistischer Wettbewerb ; Wohlfahrtseffekt ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Dröge, Susanne ; Schröder, Philipp J. H.
• Event: Veröffentlichung
• (who): Deutsches Institut für Wirtschaftsforschung (DIW)
• (where): Berlin
• (when): 2003

Further information

• Handle: http://hdl.handle.net/10419/18077
• Last update: 10.03.2025, 11:43 AM CET