Green Goods, Pollution & Optimal Tax/Subsidy with Caring Consumers

<strong>Center for International Trade and Development (JNU) </strong> departmental seminar on <strong>Green Goods, Pollution &amp; Optimal Tax/Subsidy with Caring Consumers</strong> <strong>Authors: Parimal Kanti Bag </strong>(NUS Economics Dept), <strong>Debasis Mondal</strong> (IIT Delhi) and <strong>Bibhas Saha </strong>(Durham University business school) <strong>Abstract: </strong>A monopolist serving consumers with a fraction caring about the environment may use green or non-green technology and generate pollution at differential rates. We show that the green good may generate overall more pollution than the non-green good. Left on its own, the monopolist may over- or under-produce the good depending on the fraction of caring consumers. And a social planner might prefer the non-green over green good. With taxes and subsidies as instruments, a social planner may use both to correct for double distortion - one due to monopoly production and the other due to environmental externality. Also considered is the role of a green lobbyist who likes to reduce pollution, whereas the government wants to maximize aggregate social surplus. Date: <strong>Wednesday, 30th March 2016</strong>