Emission Tax and Compensation Subsidy with Cross-Industry Pollution

Kuang-Feng Cheng, Chien-Shu Tsai, Chu-Chuan Hsu, Szu-Chung Lin, Ting-Chung Tsai and Jen-Yao Lee
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Kuang-Feng Cheng: Department of International Business, National Kaohsiung University of Science and Technology, Kaohsiung City 80778, Taiwan
Chien-Shu Tsai: Department of Tourism Management, Kao Yuan University, Kaohsiung City 82146, Taiwan
Chu-Chuan Hsu: Department of Marketing and Logistics Management, Yu Da University of Science and Technology, Miaoli County 36143, Taiwan
Szu-Chung Lin: School of Management and Economics, Kunming University of Science and Technology, Kunming 650093, China
Ting-Chung Tsai: Department of International Business, National Kaohsiung University of Science and Technology, Kaohsiung City 80778, Taiwan
Jen-Yao Lee: Department of International Business, National Kaohsiung University of Science and Technology, Kaohsiung City 80778, Taiwan

Sustainability, 2019, vol. 11, issue 4, 1-23

Abstract: This paper establishes a cross-industry pollution externality model. To explain a benevolent government, it may be possible to tax part of the welfare gains and use the revenue to compensate the affected polluted industry for the damage cost, thereby improving welfare. We show that the social welfare under emission tax with production subsidy is higher than the results of emission tax without production subsidy. The welfare of the polluted sector under emissions trading will be lower than the results of unbalanced budget environmental policy with subsidy. The welfare of the polluted labor union under lobby for compensation will be higher than the results of environmental policy with subsidy if the pollution damage and the weight on political contributions are sufficiently high.

Keywords: production externality; productivity of labor; emission tax; labor subsidy (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
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:gam:jsusta:v:11:y:2019:i:4:p:998-:d:206097

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