Theoretical Foundations of Environmental Policy among Moral Consumers

Funded by:

• German Research Foundation (DFG)

Empirical and experimental studies can demonstrate environmentally friendly actions by individuals. This behavior cannot be explained by the homo economicus concept of man that prevails in economics, but indicates that individuals have moral preferences or behave morally. Individuals with moral preferences will contribute more to the public commodity “environment” than homo economicus, but the market will still fail to optimally utilize resources that society is finding increasingly scarce. This research project uses general equilibrium analysis to examine how moral preferences affect the effects of environmental policy and to identify the optimal environmental policy. In the process, both closed economies and open economies with international trade relations and transboundary pollution are considered.

Seven specific work projects examine the influence of moral preferences on (i) emissions taxation and trading, (ii) optimal nudging, (iii) renewable energy subsidies, (iv) unilateral environmental policies, and (v) international environmental agreements.

Press releases:

• “Wirtschaftliches Handeln und dabei die Umwelt schonen” (29 April 2021) (aricle in German only)