FEEM working papers "Note di lavoro"
2020.31
Date: 18/12/2020

Is Environmentalism the Right Strategy to Decarbonize the World?


Authors:
Marco A. Marini (Sapienza Università di Roma); Ornella Tarola (Sapienza Università di Roma); Jacques-François Thisse (CORE-UCLouvain, HSE University, CEPR)
JEL n.: D11, L13, Q50
Keywords: Environmentalism, Psychic Costs and Benefits, Vertical Product Differentiation, Environmental Policy

Abstract

We study how the supply of environmentalism, which is defined by psychic benefits (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 firms with more market power which they use to maximize profits. 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


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