Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/325011 
Year of Publication: 
2025
Series/Report no.: 
CESifo Working Paper No. 12020
Publisher: 
CESifo GmbH, Munich
Abstract: 
We examine a green transition policy involving a tax on brown goods in an economy where preferences for green consumption consist of a constant intrinsic individual component and an evolving social component. We analyse equilibrium dynamics when social preferences exert a positive externality in green consumption, creating complementarity between policy and preferences. The results show that accounting for this externality allows for a lower tax rate compared to policy ignoring the social norm effects. Furthermore, stability conditions permit gradual tax reductions or even removal along the transition path, minimising welfare losses. Thus, incorporating policy-preference interactions improves green transition policy design.
Subjects: 
climate change
endogenous preferences
green transition
social norms
temporary policies
JEL: 
H23
H31
Q58
Document Type: 
Working Paper
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