Discussion Paper Details

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Title: Is Environmentalism the Right Strategy to Decarbonize the World?

Author(s): Marco Marini, Ornella Tarola and Jacques-François Thisse

Publication Date: October 2020

Keyword(s): Environmental policy, Environmentalism, Psychic Costs and Benefits and Vertical Product Differentiation

Programme Area(s): Industrial Organization, International Trade and Regional Economics and Public Economics

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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Bibliographic Reference

Marini, M, Tarola, O and Thisse, J. 2020. 'Is Environmentalism the Right Strategy to Decarbonize the World?'. London, Centre for Economic Policy Research.