Government Incentives when Pollution Permits are Durable Goods

Resource and Energy Economics, 1998

This paper first shows that subsidies to the input into pollution abatement are inefficient when a Pigouvian pollution tax is available. Using a model where the government receives political contributions from environmental and industry lobby groups, it then explains the use of pollution abatement subsidies in environmental policy as primarily being tools for redistribution. The pollution abatement subsidy and pollution tax are determined in political equilibrium. The equilibrium subsidy rate is shown to depend on the subsidy elasticities of pollution and abatement, and lobby group membership.

2009

Government spending has significant environmental implications. This paper analyzes the effect of the allocation of government spending between public goods broadly defined and private goods or non-social subsidies on air and water pollution. The theoretical model predicts that a reallocation of expenditures from private subsidies to public goods improves environmental quality by reducing production pollution. We estimate an empirical model that shows that such a reallocation causes a significant reduction in air pollutants namely sulfur dioxide and lead and an improvement in water quality measures including dissolved oxygen and biological oxygen demand.

Journal of Environmental Economics and Management, 1997

This paper develops a positive theory explaining pollution tax policy outcomes in a small open economy. The equilibrium tax rate depends on lobby group membership, the relative importance of lobbying activities, and the tax elasticity of pollution. The equilibrium properties are investigated. The model is extended to incorporate pollution abatement and a pollution abatement subsidy. We show that total pollution may be increasing in the pollution abatement subsidy rate. This effect arises because the equilibrium pollution tax rate may be decreasing in the subsidy rate due to altered political influence of the lobby groups in the political equilibrium.

This paper deals with the general equilibrium welfare effects of pollution taxes within the framework of green tax reforms. Some authors have recognized recently the difficulty to undertake empirical analysis of the double dividend hypothesis as long as there is not a 'standard' definition. The aims of this paper are to highlight misinterpretations of policy assessments in the double dividend literature, to specify which of the efficiency costs and benefits should be ascribed to each dividend, and then, to propose a definition to the first dividend and the second dividend. Finally, the paper analyze a green tax reform for the US economy to illustrate the advantages of our definitions for political implementation: current definitions in the literature overestimate the efficiency costs and, furthermore, the new definitions proposed in this paper provide information by themselves and not as a partial view of the whole picture. ___________________________________________________...

SSRN Electronic Journal, 2002

In actual environmental policy, the design of actual pollution emission taxes differs significantly with the optimal Pigovian tax. In particular, earmarking prevails and actual taxes are usually combined with regulation. Furthermore tax rates are generally too low to significantly influence polluters' behavior. The paper develops a political economy model to explain these design parameters: the tax rate, earmarking pattern and whether the tax is combined with a regulation. An incumbent government selects these parameters under the influence of a green and a polluters' lobby groups. An earmarked tax is introduced in equilibrium which rate is lower than the regulatory shadow price when the status quo regulation is imperfectly enforced and if the green lobby is sufficiently weak.

Environmental pollution has been a vital issue day by day due to the increase of production and consumption activities, the rapid increase of the world population and varieties of people’s needs accordingly. The dream of leaving an indigenous and unpolluted nature for the future generations has been getting difficult because of polluting the nature and besides since no measures have been adequately taken to prevent pollution of the environment. Today the states have used the tax policies to reach the goals on environmental policy and by taxation of factors damaging environment, it has been mainly aimed that those who degrade the environment should bear the penalty of the degradations they do, rather than increasing public incomes. Environmental taxes are known as green tax, carbon tax, emission tax and pollution tax in the literature. In this study, at first it will be explained the contributions of environmental taxes and their implementations in different countries in the literature, then compared environmental taxes in our country with implementations in different countries; finally the lacks on this topic and some theoretical approaches will be analyzed. Keywords: Environment, Pollution, Tax, Tax Policy

This article attempts to contribute to the analysis of identifying an optimum tax for the generation of pollutants when both anti-bads and bads are included in the utility function. Bads and anti-bads are introduced via a technological tradeoff relationship with substitution allowed. It is shown that in some instances in order to know the optimum tax on polluters it may not be important to know the marginal damage function. A brief analysis is undertaken of the tradeoffs between private actions to reduce the effect of pollutants and collective provisions for pollution control. The analysis further demonstrates that under certain circumstances the appropriate tax on polluters can be calculated from observed defensive behavior on the part of receptors.

Environmental Economics and Policy Studies, 2015

This paper examines second-best pollution taxation within a unified framework, which simultaneously takes into account society's preferences towards producer profits and environmental costs, the possibility of raising public revenue through pollution taxes and the costly administration of pollution taxes. Several new results were derived concerning the discrepancy between second-best taxes and the Pigouvian rule. In addition, this paper shows that previous results identified in the relevant literature are special cases of our results. It should be stressed, however, that the comparison between first-best and second-best taxation is an empirical issue. Finally, the policy implications of the results are also discussed.

1996

Annual Review of Resource Economics, 2015

We review the literature on bankable emission permits which has developed over the last two decades. Most articles analyze either theoretical or simulation models. The theoretical literature considers the problem of minimizing the discounted sum of social costs and the possibility of decentralizing the solution through competitive permit markets. In some cases, authors do not explicitly consider pollution damages but instead assume that the planner's goal is to minimize the discounted social cost of reducing cumulative emissions by a given amount. In other cases, authors do not explicitly consider an emissions reduction target but assume that the goal is to minimize the discounted sum of pollution damages and abatement costs. Simulations permit evaluation of alternative government policies under uncertainty. We conclude by pointing out directions for future work. * This paper has been accepted for publication by the Annual Review of Resource Economics. We would like to thank Karsten Neuhoff, Richard Sandor, Andrew Stocking, and Luca Taschini for valuable discussions on permit markets and Dallas Burtraw, Harrison Fell, Stephen Holland, and Michael Moore for valuable comments on a previous draft of this survey.