Nonpoint source pollution taxes and excessive tax burden
Nonpoint source pollution taxes and excessive tax burden
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.
ambient tax, asymmetric information, differential games, moral hazard, nonpoint source pollution
229-251
Karp, Larry S.
aeaa7666-ca88-4f47-85c5-81043cdd8e8a
2005
Karp, Larry S.
aeaa7666-ca88-4f47-85c5-81043cdd8e8a
Karp, Larry S.
(2005)
Nonpoint source pollution taxes and excessive tax burden.
Environmental and Resource Economics, 31 (2), .
(doi:10.1007/s10640-005-1772-8).
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.
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Published date: 2005
Keywords:
ambient tax, asymmetric information, differential games, moral hazard, nonpoint source pollution
Identifiers
Local EPrints ID: 39697
URI: http://eprints.soton.ac.uk/id/eprint/39697
ISSN: 0924-6460
PURE UUID: 70e69abe-a57d-4494-aedb-3facdc54380b
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Date deposited: 29 Jun 2006
Last modified: 15 Mar 2024 08:16
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Author:
Larry S. Karp
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