Pollution Abatement Strategy and the Dichotomy of “Green” Versus “Non-green” Products: A New Analytical Insight

Abstract

This paper shows how a strategy of reducing greenhouse gas emissions combined with economic cycles can lead to particular consumption behaviours. We are assuming the existence of an “economic” demand for “non-green” goods and a “social” demand for “green” goods. We are also assuming the existence of a dispersion of household characteristics organised around an average profile in each class. In times of sustained economic recession, incomes of individual agents fall. Therefore, the budgetary constraint becomes stronger, and falling incomes will have a negative impact on the demand for “green” goods. Consumers with higher incomes will reduce their demand for “green” goods, creating pressure on prices and quantities. As consumers abandon the “green” goods market, they will switch to the “non-green” goods market, especially as prices are lower there, which will stimulate demand and create a new upward pressure on the demand for “non-green” goods.