Regulating chemical emissions with risk-based environmental taxation

Thomas Sadler

International Advances in Economic Research, 2000, vol. 6, issue 2, 287-305

Abstract: This paper develops a policy of risk-based environmental taxation for chemical emissions. A scoring index of chemical risk values for target pollutants first takes into account potential human health risk and ecological risk. A common tax base called the risk unit, which reflects the risk values from the scoring index, is then identified for individual pollutants. By determining the number of risk units for target emissions and levying a single tax rate on one risk unit, the risk-based tax system assigns a different pollution price to each chemical release. The policy sets rates according to marginal damage and provides target industry with permanent incentive for pollution abatement. By narrowing the gap between the marginal private cost and constrained marginal social cost of the chemical emission externality, the environmental tax system creates efficiency gains. Copyright International Atlantic Economic Society 2000

Date: 2000
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DOI: 10.1007/BF02296109

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