On the paradoxical case of a consumer-based environmental subsidy policy

Toshimitsu, Tsuyoshi

doi:10.1016/j.econmod.2009.08.002

Cited by 17 publications

(12 citation statements)

References 14 publications

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“…This result further suggests that the level of economic development is a key determinant of per capita CO2 emissions and countries with higher GDP ratios in agriculture and services are characterized by low per capita CO2 emissions. Subsidies provided for purchasing environmentally friendly goods is also available in some countries (Toshimitsu, 2010). KESDM (2012) in Profile Migas Diversifikasi BBM ke BBG mandated to reduce dependence on petroleum to 20% and increase the role of gas to 30%, coal to 33% and new and renewable energy to 17% in energy mix in 2025.…”

Section: Energy Subsidy Policy-energy Consumption-co 2 Emissons-economentioning

confidence: 99%

Does Energy Subsidy Policy Affect Sustainable Energy Development?: Evidence From Indonesia Using Granger Causality Test on CO2 Emissions

Makbul¹,

Wang²,

Rodkrajab³

et al. 2017

Proceedings of the International Conference on Transformations and Innovations in Management

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This study was conducted to analyze the effect of energy subsidy on country's sustainable energy development by looking in depth at the statistic data on CO2 emissions in Indonesia. The method used in this study is Granger Causality Test and used series data from 1986-2014. Granger Causality Test showed that energy subsidy has weak influenced (significant at 10%) to CO2 emissions and statistically proves that energy subsidy is the reason to the change of CO2 emissions. While industrial energy consumption has strong influenced (significant at 1%) to CO2 emissions, and energy price has strong influenced (significant at 1%) to the change in industrial energy consumption. Based on the discussion, it clearly conduces to pro-growth, pro-job and pro-poor but not fully promote pro-environment. Therefore, we suggest that CO2 emissions can be reduced by the cost developing green energy technologies. Energy subsidy should improve its focus on allocating funds on research that seeking renewable energy, applying environmentally friendly technologies, in order to achieve sustainable energy development, and to protect the environment from environmental degradation caused by increasing CO2 emissions in Indonesia.

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Section: Energy Subsidy Policy-energy Consumption-co 2 Emissons-economentioning

confidence: 99%

Does Energy Subsidy Policy Affect Sustainable Energy Development?: Evidence From Indonesia Using Granger Causality Test on CO2 Emissions

Makbul¹,

Wang²,

Rodkrajab³

et al. 2017

Proceedings of the International Conference on Transformations and Innovations in Management

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“…Jørgensen and Zaccour (1999) extend previous studies by introducing guaranteed buys and a substitute product (an existing technology), and find out (in the case of a constant price of the alternative technology) that an optimal subsidy rate is decreasing over time. Based on an environmentally differentiated products model, Toshimitsu (2010) has shown a paradoxical case generated by a consumer-based environmental subsidy where the subsidy policy degrades the environment and is (not) socially optimal if the marginal social valuation of environmental damage is sufficiently small (large, respectively). Cantono and Silverberg (2009) set up a network model of new technology diffusion that combines contagion among consumers with heterogeneity of agent characteristics.…”

Section: Introductionmentioning

confidence: 99%

“…In most previous studies the objectives of the government are to achieve the amount target that the green products sell in fixed period by given budget. This might lead to such a paradox as the subsidy policy degrades the environment shown in Toshimitsu (2010). The reason partly lies in that the government subsidy reduces the price of green products so that they can sell more.…”

Section: Introductionmentioning

confidence: 99%

Optimal subsidy policy for accelerating the diffusion of green products

Hong-guang

2013

JIEM

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Purpose: We consider a dynamic duopoly market in which two firms respectively produce green products and conventional products. The two types of product can substitute each other in some degree. Their demand rates depend on not only prices but the consumers’ increasing environmental awareness. Too high initial cost relative to conventional products becomes one of the major obstacles that hinder the adoption of green products. The government employs subsidy policy to trigger the adoption of green products. The purpose of the paper is to explore the optimal subsidy strategy to fulfill the government’s objective.

Design/methodology/approach: We suppose the players in the game employ open-loop strategies, which make sense since the government generally cannot alter his policy for political and economic purposes. We take a differential game approach and use backward induction to analyze the firms’ pricing strategy under Cournot competition, and then focus upon a Stackelberg equilibrium to find the optimal subsidy strategy of the government.

Findings: The results show that the more remarkable the energy or environmental performance, or the bigger the initial cost of green products, the higher the subsidy level should be. Due to the increasing environmental awareness and the learning curve, the optimal subsidy level decreases over time.

Research limitations/implications: In our model several simplifying assumptions are made to keep the analysis more tractable. In particular, we have assumed only one type of green product. In reality several types of product with different energy or environmental performances exist. Our research can be extended in future work to take into account product differentiation on energy or environmental performance and devise a discriminatory subsidy policy accordingly.

Originality/value: In the paper we set the objective of the government as minimizing the total social cost induced by the energy consumption or environmental side effect and government expenditure. In addition, we assume the price of conventional products is variable and examine the Cournot competition between the two firms. This study can provide more valuable managerial insights into improving the design of subsidy policy.

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“…Kate [55] noted that implicit subsidies provided to Mexican industries in terms of below market price for petroleum fuels resulted in 5.7 per cent increase in energy intensity between 1970 and 1990, as compared to decrease in energy intensity by 35.3 per cent in OECD industry. However, subsidies provided for purchasing environmentfriendly goods are also available in some countries [56]. LaFrance et al [57] show that subsidized crop insurance policies result in expansion of agriculture in marginal quality (economically inferior and environmentally vulnerable) land, which is environmentally detrimental.…”

Section: Subsidy and Climate Change Concernsmentioning

confidence: 99%

Relationship between Fiscal Subsidies and CO₂ Emissions: Evidence from Cross-Country Empirical Estimates

Mukherjee

Chakraborty

2014

Economics Research International

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Countries disburse subsidies with various motivations, for example, to promote industrial development, facilitate innovation, support national champions, and ensure redistribution. The devolution of subsidies may however also encourage economic activities leading to climate change related concerns, reflected through higher greenhouse gases (GHGs) emissions, if such activities are conducted beyond sustainable point. Through a cross-country empirical analysis involving 131 countries over 1990-2010, the present analysis observes that higher proportional devolution of budgetary subsidies leads to higher CO 2 emissions. The countries with higher CO 2 emissions are also characterized by higher per capita GDP, greater share of manufacturing sector in their GDP, and higher level of urbanization. In addition, the empirical findings underline the importance of the type of government subsidy devolution on CO 2 emission pattern. The analysis underlines the importance of limiting provision of subsidies both in developed and developing countries.

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On the paradoxical case of a consumer-based environmental subsidy policy

Cited by 17 publications

References 14 publications

Does Energy Subsidy Policy Affect Sustainable Energy Development?: Evidence From Indonesia Using Granger Causality Test on CO2 Emissions

Does Energy Subsidy Policy Affect Sustainable Energy Development?: Evidence From Indonesia Using Granger Causality Test on CO2 Emissions

Optimal subsidy policy for accelerating the diffusion of green products

Relationship between Fiscal Subsidies and CO₂ Emissions: Evidence from Cross-Country Empirical Estimates

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On the paradoxical case of a consumer-based environmental subsidy policy

Cited by 17 publications

References 14 publications

Does Energy Subsidy Policy Affect Sustainable Energy Development?: Evidence From Indonesia Using Granger Causality Test on CO2 Emissions

Does Energy Subsidy Policy Affect Sustainable Energy Development?: Evidence From Indonesia Using Granger Causality Test on CO2 Emissions

Optimal subsidy policy for accelerating the diffusion of green products

Relationship between Fiscal Subsidies and CO2 Emissions: Evidence from Cross-Country Empirical Estimates

Contact Info

Product

Resources

About

Relationship between Fiscal Subsidies and CO₂ Emissions: Evidence from Cross-Country Empirical Estimates