Journal
JOURNAL OF ENVIRONMENTAL ECONOMICS AND MANAGEMENT
Volume 88, Issue -, Pages 35-68Publisher
ACADEMIC PRESS INC ELSEVIER SCIENCE
DOI: 10.1016/j.jeem.2017.09.004
Keywords
Rebound/backfire effects; Green consumption subsidy; Green technology promotion; The substitution; Wealth; Sectoral reallocation effects
Categories
Funding
- Academia Sinica [23-6M]
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This paper develops a dynamic two-good (clean and dirty goods), two-sector model to explore the implications of the macroeconomic environmental rebound/backfire effect for environmentally-friendly product promotions on not only the demand side (a subsidy on the clean-good consumption), but also the supply side (a technology promotion in the clean-good production). The macroeconomic environmental rebound/backfire is decomposed into three effects - the substitution, wealth, and sectoral reallocation effects. We show that the steady-state pollution stock exhibits a U-shaped relationship with either demand-side or supply-side green promotions. Our calibrated result indicates that in terms of pollution, the macroeconomic rebound effectfor the economy as a whole appears to be substantial. More pronounced rebound effects are present when the elasticity of substitution between the clean- and dirty-good consumption is lower, the labor supply is more elastic, the environmental efficiency of clean goods is lower, and the technology level in the clean-good production is higher. We also show that a pollution rebound can result in a social welfare improvement, implying that the rebound effect somewhat improves economic efficiency, and so policies aimed at mitigating the rebound effect may be counterproductive from a welfare perspective. (C) 2017 Elsevier Inc. All rights reserved.
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