Abstract
Instead of pigovian taxes, environmental policies favor targeted subsidies on specific technologies as well as other non-conventional instruments, such as the introduction of green clauses in public procurement. We investigate potential political economy reasons for such a choice of instruments, marked by: use of differentiated and targeted instruments; which cover a limited share of emissions; associated with very high shadow environmental prices in the subsidized sectors; and simultaneous absence, or near-absence, of widespread pricing of nuisances. Within the framework of Maskin-Tirole s model of representative democracy (2004), this type of configuration can arise rationally, as equilibrium of the political decision-making process. The corresponding context is one where decision-makers, highly interested in re-election, are obliged to take long-term environmental challenges into consideration, the public being dependent of the information given by these sectors to understand the policies that are implemented. This suggests different ways to improve the governance of environmental policies. JEL Codes: H23, Q58. Keywords: Pigovian Taxes, Environmental Subsidies, Accountability.
Published Version
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