Optimal environmental taxes and standards: Implications of the materials balance

Udo Ebert and Heinz Welsch

Ecological Economics, 2011, vol. 70, issue 12, 2454-2460

Abstract: This paper investigates the implications of the materials balance for optimal environmental policy. We find that neglecting the materials–emissions relationship – as is common in models of optimal environmental regulation – implies biases, whose sign depends on the regulatory instrument chosen. When emissions are regulated through an emission tax, the seemingly optimal tax is too high. When regulation proceeds through the use of an emission standard, the seemingly optimal standard is too lax.

Keywords: Environmental regulation; Emission tax; Emission standard; Materials balance (search for similar items in EconPapers)
JEL-codes: D24 D62 H23 Q58 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolec:v:70:y:2011:i:12:p:2454-2460

DOI: 10.1016/j.ecolecon.2011.08.002

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