Optimal Green Taxation With Both Emission and Commodity Taxes

Basharat Pitafi and James Roumasset

No 200208, Working Papers from University of Hawaii at Manoa, Department of Economics

Abstract: Several authors have argued that the second-best environmental tax on a “dirty good” is less than marginal emission damage associated with its consumption. These studies limit their analysis to cases in which emissions can only be reduced by a reduction of the dirty good. With a more general specification that allows abatement through input substitution, we show that the direct emissions tax cannot be less than marginal emission damage, regardless of the normalization.

Keywords: Second-best environmental taxation; Pigouvian taxation; tax normalization; Revenue recycling; Tax interaction (search for similar items in EconPapers)
JEL-codes: D62 H21 H23 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2002
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http://www.economics.hawaii.edu/research/workingpapers/WP_02-8.pdf First version, 2002 (application/pdf)

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Working Paper: Optimal Green Taxation with Both Emission and Commodity Taxes (2002)
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