edoc

Learning abatement costs: on the dynamics of the optimal regulation of experience goods

Hintermann, Beat and Lange, Andreas. (2013) Learning abatement costs: on the dynamics of the optimal regulation of experience goods. Journal of environmental economics and management, 66 (3). pp. 625-638.

[img]
Preview
PDF - Accepted Version
Available under License CC BY-NC-ND (Attribution-NonCommercial-NoDerivatives).

255Kb

Official URL: http://edoc.unibas.ch/dok/A6212120

Downloads: Statistics Overview

Abstract

We study the introduction of new technologies when their costs are subject to idiosyncratic uncertainty and can only be fully learned through individual experience.  We set up a dynamic model of clean experience goods that replace old polluting consumption options and show how optimal regulation evolves over time.  In our base setting where social and private learning incentives coincide, the optimal tax on the polluting consumption is increasing over time.  We show, however, that if social and private learning incentives diverge because the private discount rate exceeds the social discount rate, it may be optimal to temporarily increase the tax rate beyond net marginal external damages to induce more learning before reducing the tax rate to the steady-state level.  Alternatively, one could complement the tax with subsidies for first-time users which can be phased out over time.  Similar results apply if consumers have biased expectations.  We therefore give a rationale for introductory subsidies on new, clean technologies and non-monotonic tax paths from a perspective of consumer learning.
Faculties and Departments:06 Faculty of Business and Economics > Departement Wirtschaftswissenschaften > Professuren Wirtschaftswissenschaften > Public Economics / Public Finance (Hintermann)
UniBasel Contributors:Hintermann, Beat
Item Type:Article, refereed
Article Subtype:Research Article
Bibsysno:Link to catalogue
Publisher:Elsevier
ISSN:0095-0696
Note:Publication type according to Uni Basel Research Database: Journal article
Language:English
Identification Number:
Last Modified:12 Oct 2017 07:59
Deposited On:31 Jan 2014 09:50

Repository Staff Only: item control page