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How Pollution Taxes May Increase Pollution and Reduce Net Revenues

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  • Fredriksson, Per G

Abstract

This paper develops a positive theory of pollution taxation by a federal authority when pollution abatement subsidies are used by local governments. Environmental and industry lobby groups influence governments with campaign contributions. First, pollution may increase in the pollution tax because the abatement subsidy increases (decreases) with the tax, and pollution increases (decreases) in the abatement subsidy. This occurs because the lobbying incentives change at a pollution tax reform. Second, pollution taxes may reduce net revenues because subsidy expenditures rise. Third, pollution may increase simultaneously as net revenues fall. Finally, the welfare effect of a pollution tax may be negative. Copyright 2001 by Kluwer Academic Publishers

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  • Fredriksson, Per G, 2001. "How Pollution Taxes May Increase Pollution and Reduce Net Revenues," Public Choice, Springer, vol. 107(1-2), pages 65-85, April.
    • Handle: RePEc:kap:pubcho:v:107:y:2001:i:1-2:p:65-85
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    3. Cong Minh Huynh, 2020. "Shadow economy and air pollution in developing Asia: what is the role of fiscal policy?," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 22(3), pages 357-381, July.
    4. Marc St‐Pierre & Aaron A. Elrod, 2022. "The perverse effect of environmental regulation on emissions: The role of product‐mix changes," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 24(1), pages 197-235, February.
    5. Widhayani Puri Setioningtyas & Csaba Bálint Illés & Anna Dunay & Abdul Hadi & Tony Susilo Wibowo, 2022. "Environmental Economics and the SDGs: A Review of Their Relationships and Barriers," Sustainability, MDPI, vol. 14(12), pages 1-24, June.
    6. Fuhai Hong & Tat-How Teh, 2019. "Bureaucratic Shirking, Corruption, and Firms’ Environmental Investment and Abatement," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(2), pages 505-538, October.
    7. John K. Wilson & Richard Damania, 2003. "Corruption, Political Competition and Environmental Policy," School of Economics and Public Policy Working Papers 2003-09, University of Adelaide, School of Economics and Public Policy.
    8. Fünfgelt, Joachim & Schulze, Günther G., 2016. "Endogenous environmental policy for small open economies with transboundary pollution," Economic Modelling, Elsevier, vol. 57(C), pages 294-310.
    9. Leo Wangler, 2012. "The political economy of the green technology sector: A study about institutions, diffusion and efficiency," European Journal of Law and Economics, Springer, vol. 33(1), pages 51-81, February.

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