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Optimal environmental taxes and standards: Implications of the materials balance

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  • Ebert, Udo
  • Welsch, Heinz

Abstract

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.

Suggested Citation

  • Ebert, Udo & Welsch, Heinz, 2011. "Optimal environmental taxes and standards: Implications of the materials balance," Ecological Economics, Elsevier, vol. 70(12), pages 2454-2460.
  • Handle: RePEc:eee:ecolec:v:70:y:2011:i:12:p:2454-2460
    DOI: 10.1016/j.ecolecon.2011.08.002
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    References listed on IDEAS

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    Cited by:

    1. Anderson, Blake & M'Gonigle, Michael, 2012. "Does ecological economics have a future?," Ecological Economics, Elsevier, vol. 84(C), pages 37-48.

    More about this item

    Keywords

    Environmental regulation; Emission tax; Emission standard; Materials balance;

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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