RT Journal Article
T1 Long-term versus short-term environmental tax policy under asymmetric information
A1 Antelo Suárez, Manel
A1 Bru, Lluís
A1 Peón Pose, David
K1 Clean and dirty technology
K1 Short-term and long-term environmental tax/subsidy policy
K1 Asymmetric information
K1 Welfare
AB We examine the interaction between a firm that uses either a dirty or a clean technology to produce a product over two periods, 1 and 2, and an environmentally conscious regulator that chooses the environmental tax/subsidy policy. The regulator ignores with which technology the firm manufactures the product and only has a prior belief about it. In this context, if the regulator can credibly commit to the policy for both periods, social welfare is generally higher than if it cannot commit, because distortions in firm's production at period 1 for signalling purposes strongly reduces the optimality of an environmental policy of short duration. A period-by-period policy in which the regulator does not commit to the policy terms for period 2 (which will be contingent to information provided by the firm in period 1) is only optimal when clean technology is very expensive to produce with it and the regulator's environmental concern is not very high. The results highlight the importance of taking into account the time horizon in policymaking, as well as the limitations of regulatory policies that seek to elicit information about the type of technology used by firms.
PB Elsevier
SN 0959-6526
YR 2023
FD 2023
LK http://hdl.handle.net/10347/33139
UL http://hdl.handle.net/10347/33139
LA eng
NO Journal of Cleaner Production Volume 427, 15 November 2023, 139078
DS Minerva
RD 9 jun 2026