This paper addresses optimal taxation, when the relationship between consumption and environmental damage is uncertain and treated as a random variable by policy makers. The main purpose is to analyze how additional uncertainty about this relationship affects the optimal unit tax on the consumption good that is causing environmental damage. We find that the optimal response to this tax depends on (i) the attitudes towards risk and (ii) how other policy instruments affect the demand for the good that is causing damage to the environment.
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Paper provided by Uppsala - Working Paper Series in its series Papers with number
1999:14.
Length: 14 pages Date of creation: 1999 Date of revision: Handle: RePEc:fth:uppaal:1999:14
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Find related papers by JEL classification: H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation D62 - Microeconomics - - Welfare Economics - - - Externalities D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
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