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Fiscal Policies To Control Pollution: International Experience


Author Info

  • Glenn Jenkins

    (Queen's University, Kingston, On, Canada)



Over the past few decades, the environmental policy debate has evolved to recognize the utility of influencing pollution abatement by using market forces that integrate economic and environmental decision-making. Market-based incentive (MBI) instruments may be broadly classified to include environmental taxes, investment tax incentives, tradable permits, user charges and deposit refund systems. Investment tax credits have been the preferred fiscal instruments for pollution control because they seem to balance environmental considerations with concerns about industrial competitiveness. Their use, however, may not have the desired effect of reducing pollution and may, in certain circumstances, increase emissions levels. The taxes are also sometimes seen as subsidies in disguise. This report is a comparative analysis of the fiscal instruments used by countries in Asia, Europe and North America, whose design philosophy explicitly incorporates an environmental agenda. In particular, it discusses the intent and design of investment tax incentives, presenting a review of the basic theoretical framework necessary for understanding how they function. In addition, it outlines a set of criteria that may be used to evaluate their economic and environmental impact and describes possible legislative and structural revisions that may enhance their effectiveness and promote their efficiency.

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Bibliographic Info

Paper provided by JDI Executive Programs in its series Development Discussion Papers with number 1992-01.

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Length: 20 pages
Date of creation: Oct 1992
Date of revision:
Handle: RePEc:qed:dpaper:98

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Keywords: Pollution control; policies international experience;

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Cited by:
  1. Per Fredriksson, 2001. "How Pollution Taxes may Increase Pollution and Reduce Net Revenues," Public Choice, Springer, Springer, vol. 107(1), pages 65-85, April.
  2. Arjan Ruijs & Herman R.J. Vollebergh, 2013. "Lessons from 15 Years of Experience with the Dutch Tax Allowance for Energy Investments for Firms," OECD Environment Working Papers 55, OECD Publishing.
  3. Rupayan Pal & Bibhas Saha, 2011. "Environmental outcomes in a model of mixed duopoly," University of East Anglia Applied and Financial Economics Working Paper Series, School of Economics, University of East Anglia, Norwich, UK. 030, School of Economics, University of East Anglia, Norwich, UK..
  4. Lisandro Abrego & Carlo Perroni, 2002. "Investment subsidies and Time-Consistent Environmental Policy," Oxford Economic Papers, Oxford University Press, vol. 54(4), pages 617-635, October.
  5. Arguedas, Carmen & van Soest, Daan P., 2009. "On reducing the windfall profits in environmental subsidy programs," Journal of Environmental Economics and Management, Elsevier, vol. 58(2), pages 192-205, September.
  6. Herman R.J. Vollebergh, 2006. "Differential Impact of Environmental Policy Instruments on Technological Change: A Review of the Empirical Literature," Tinbergen Institute Discussion Papers 07-042/3, Tinbergen Institute.
  7. Kennedy, Peter W. & Laplante, Benoit, 1995. "Equilibrium incentives for adopting cleaner technology under emissions pricing," Policy Research Working Paper Series 1491, The World Bank.


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