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Second-Best Environmental Policy and Nonconvexities : The Asymmetry Between Taxes and Tradeable Permits

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Author Info
Baranzini, A

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Abstract

In second-best environmental policies, nonconvexities arise because of decreasing marginal pollution abatement costs. In this case, we chow that, unlike tradeable permits, taxes may introduce incorrect incentives. Moreover, even when taxes lead to efficient solutions, the tax rate should not be based on marginal pollution abatement cost, but to average costs.

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Publisher Info
Paper provided by University of Geneva, Department of Political Economy in its series University of Geneva Economics Working Papers with number 96.01.

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Length: 8 pages
Date of creation: 1996
Date of revision:
Handle: RePEc:fth:geneec:96.01

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Related research
Keywords: POLLUTION CONTROL; POLLUTION LEVEL; REGULATION;

Find related papers by JEL classification:
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes
K32 - Law and Economics - - Other Substantive Areas of Law - - - Environmental, Health, and Safety Law
G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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