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Optimal environmental taxes and standards: Implications of the materials balance

  • Ebert, Udo
  • Welsch, Heinz

This paper investigates the implications of the materials balance for optimal environmental policy. We find that neglecting the materials–emissions relationship – as is common in models of optimal environmental regulation – implies biases, whose sign depends on the regulatory instrument chosen. When emissions are regulated through an emission tax, the seemingly optimal tax is too high. When regulation proceeds through the use of an emission standard, the seemingly optimal standard is too lax.

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Article provided by Elsevier in its journal Ecological Economics.

Volume (Year): 70 (2011)
Issue (Month): 12 ()
Pages: 2454-2460

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Handle: RePEc:eee:ecolec:v:70:y:2011:i:12:p:2454-2460
DOI: 10.1016/j.ecolecon.2011.08.002
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolecon

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  8. Charles D. Kolstad, 2000. "Spatial Environmental and Resource Economics," Books, Edward Elgar Publishing, number 1918.
  9. Russell, Clifford S., 2001. "Applying Economics to the Environment," OUP Catalogue, Oxford University Press, number 9780195126846, December.
  10. Tim Coelli & Ludwig Lauwers & Guido Huylenbroeck, 2007. "Environmental efficiency measurement and the materials balance condition," Journal of Productivity Analysis, Springer, vol. 28(1), pages 3-12, October.
  11. Lauwers, Ludwig, 2009. "Justifying the incorporation of the materials balance principle into frontier-based eco-efficiency models," Ecological Economics, Elsevier, vol. 68(6), pages 1605-1614, April.
  12. Udo Ebert & Heinz Welsch, 2007. "Environmental Emissions and Production Economics: Implications of the Materials Balance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(2), pages 287-293.
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  14. Stefan Baumgärtner & Martin F. Quaas, 2009. "What is sustainability economics?," Working Paper Series in Economics 138, University of Lüneburg, Institute of Economics.
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