Resource title

How to Turn an Industry Green: Taxes versus Subsidies

Resource image

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Resource description

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.

Resource author

Susanne Dröge, Philipp J. H. Schröder

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/18077

Resource license

Adapt according to the presented license agreement and reference the original author.