Environmental policy in dynamic models with pollution by consumers: The greening and blackening of preferences

The paper discusses questions resulting from a study of the interaction of a change of preferences and environmental policy. In a model with pollution as a side effect of consumption environmental policy is introduced in the form of a consumption tax with or without a subsidy on eco-friendly investments. In simulations we observe the dynamic behavior of models before and after sudden changes of exogenous variables. These shocks are jumps in the preference structure of individuals towards more environmental-friendly or consumption-friendly attitudes. Additionally we examine the effect of a lagged reaction of the policy agents.