Optimal environmental taxation in response to an environmentally-unfriendly political challenger

Gal Hochman and David Zilberman

Journal of Environmental Economics and Management, 2021, vol. 106, issue C

Abstract: Different political parties place different values on the environment. In considering a two-party democratic system and capital-intensive technologies, we find that forward-looking governments incorporate the probability of losing power into their policy design. When the party in power values the environment, it may levy an optimal dynamic tax that is larger than the Pigouvian tax. We investigate the parameters that affect the magnitude of this gap and assess the effect of the gap on the adoption of clean technologies overtime.

Keywords: Elections; Embodied technologies; Environmental policy; Political uncertainty; Putty-clay; tax (search for similar items in EconPapers)
JEL-codes: L51 Q52 Q55 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:106:y:2021:i:c:s0095069620301303

DOI: 10.1016/j.jeem.2020.102407

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