Nonpoint Source Pollution Taxes and Excessive Tax Burden

Larry Karp

Environmental & Resource Economics, 2005, vol. 31, issue 2, 229-251

Abstract: If a regulator is unable to measure firms’ individual emissions, an ambient tax can be used to achieve the socially desired level of pollution. With this tax, each firm pays a unit tax on aggregate emissions. In order for the tax to be effective, firms must recognize that their decisions affect aggregate emissions. When firms behave strategically with respect to the tax-setting regulator, under plausible circumstances their tax burden is lower under an ambient tax, relative to the tax which charges firms on the basis of individual emissions. Firms may prefer the case where the regulator is unable to observe individual firm emissions, even if this asymmetric information causes the regulator to tax each firm on the basis of aggregate emissions. Copyright Springer 2005

Keywords: ambient tax; asymmetric information; differential games; moral hazard; nonpoint source pollution; D82; H20; H40; Q20 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (22)

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Related works:
Working Paper: Nonpoint source pollution taxes and excessive tax burden (2005)
Working Paper: Nonpoint Source Pollution Taxes and Excessive Tax Burden (1998)
Working Paper: Nonpoint Source Pollution Taxes and Excessive Tax Burden (1998)
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DOI: 10.1007/s10640-005-1772-8

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