Is Environmentalism the Right Strategy to Decarbonize the World?

Abstract
We study how the supply of environmentalism, which is defi ned by psychic benefi ts (costs) associated with the purchase of high-environmental (low-environmental) qualities, affects the way firms choose their products and the ensuing consequences for the global level of pollution. Contrary to general belief, a high supply of environmentalism does not give rise to a better environmental outcome because it endows fi rms with more market power which they use to maximize profi ts. By contrast, standard policy instruments such as a minimum quality standard or the use of greener technologies leads to a better ecological footprint.
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Suggested citation: Marini, M. A., C. Tarola, J.-F. Thisse, (2020), 'Is Environmentalism the Right Strategy to Decarbonize the World ?', Nota di Lavoro 31.2020, Milano, Italy: Fondazione Eni Enrico Mattei