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Abstract
This article compares a socially-optimal tax coming from a model integrating consumers’ preferences for various milks, with a tax directly computed from carbon emissions of milks with carbon prices given by the International Panel for Climate Change (IPCC). Regarding consumers’ preferences, we conducted an experiment in France for finding consumers’ willingness-to-pay (WTP) for different bottles coming from either cow’s milk or soy milk, under a regular or an organic process of production. This experiment shows higher WTPs for organic bottles than for regular bottles, and higher WTPs for soy milk than for cow’s milk. These WTPs were introduced into a model estimating the effects of regulatory instruments. From this model using WTPs, it was shown that, for milk coming from cows and soy, a tax on regular bottles and a subsidy on organic bottles maximized the consumers’ welfare. This tax on regular bottles was stronger than the tax that was alternatively estimated with the emissions and IPCC carbon prices. Indeed, a tax based on the IPCC carbon prices seemed too weak for efficiently changing the consumption towards sustainable products.
Highlights
Finding an optimal tax for limiting pollution is a thorny task
We developed a method on the basis of the maximization of consumers’ surplus using WTP
Simulations show the optimality of scenario S2, applying a positive per-unit tax on both regular cow’s milk and regular soy milk, and a per-unit subsidy on both organic cow’s milk and organic soy milk
Summary
Finding an optimal tax for limiting pollution is a thorny task. Regarding environmental taxation, it is frequently used to assess environmental damages by using life cycle analysis, without taking into account citizens’ preferences. Eco-labels are often characterized by difficulties to convey technical information, and by the proliferation of various claims and logos, implying consumers’ confusion among various labels, and risks of inefficiencies in the conveyed signals of green products [11] Beyond this specific instrument, the economic theory does not isolate one instrument dominating the other ones in terms of welfare impact [12]. When elasticities are relatively high, this often comes from relatively poor consumers who significantly react to price changes, which raises inequality concerns linked to such a policy [14] Another crucial question consists in the use of the money coming from tax ( called double dividend) that could be used for spending related to other domains, such as in helping poor people to turn to purchases of clean products and/or to finance subsidies on clean/green products [15]. Our approach abstracts from these previous dimensions for detailing estimations of tax and subsidies coming from a model integrating WTP for various products
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