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Emission Tax and Compensation Subsidy with Cross-Industry Pollution

Author

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  • Kuang-Feng Cheng

    (Department of International Business, National Kaohsiung University of Science and Technology, Kaohsiung City 80778, Taiwan)

  • Chien-Shu Tsai

    (Department of Tourism Management, Kao Yuan University, Kaohsiung City 82146, Taiwan)

  • Chu-Chuan Hsu

    (Department of Marketing and Logistics Management, Yu Da University of Science and Technology, Miaoli County 36143, Taiwan)

  • Szu-Chung Lin

    (School of Management and Economics, Kunming University of Science and Technology, Kunming 650093, China)

  • Ting-Chung Tsai

    (Department of International Business, National Kaohsiung University of Science and Technology, Kaohsiung City 80778, Taiwan)

  • Jen-Yao Lee

    (Department of International Business, National Kaohsiung University of Science and Technology, Kaohsiung City 80778, Taiwan)

Abstract

This paper establishes a cross-industry pollution externality model. To explain a benevolent government, it may be possible to tax part of the welfare gains and use the revenue to compensate the affected polluted industry for the damage cost, thereby improving welfare. We show that the social welfare under emission tax with production subsidy is higher than the results of emission tax without production subsidy. The welfare of the polluted sector under emissions trading will be lower than the results of unbalanced budget environmental policy with subsidy. The welfare of the polluted labor union under lobby for compensation will be higher than the results of environmental policy with subsidy if the pollution damage and the weight on political contributions are sufficiently high.

Suggested Citation

  • Kuang-Feng Cheng & Chien-Shu Tsai & Chu-Chuan Hsu & Szu-Chung Lin & Ting-Chung Tsai & Jen-Yao Lee, 2019. "Emission Tax and Compensation Subsidy with Cross-Industry Pollution," Sustainability, MDPI, vol. 11(4), pages 1-23, February.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:4:p:998-:d:206097
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    1. Hao Xu & Ming Luo, 2022. "Optimal Environmental Policy in a Dynamic Transboundary Pollution Game: Emission Standards, Taxes, and Permit Trading," Sustainability, MDPI, vol. 14(15), pages 1-25, July.
    2. Weimin Ma & Ranran Zhang & Shiwei Chai, 2019. "What Drives Green Innovation? A Game Theoretic Analysis of Government Subsidy and Cooperation Contract," Sustainability, MDPI, vol. 11(20), pages 1-24, October.

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