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On modeling incentive systems which utilize pollution charges for pollution abatement

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  • A. Rikun

Abstract

This paper examines a scheme of economic incentives for environmental protection, in which spatially differentiated pollution taxes are in use in compensating the pollution abatement costs. A simple mathematical model is described which determines an incentive system that encourages polluters to reduce the discharges to an acceptable level of ambient quality standards in a “cost-effective” manner. It is shown that the vector of pollution charges has to be proportional to the marginal abatement cost vector, but is smaller than the latter in magnitude. It is demonstrated that a necessary incentive effect may be achieved even if the total pollution charge is much lower (about three times) than the total abatement costs. It is also estimated how this charge incentive system reconciles conflicting criteria of cost-effectiveness and of equity. These conclusions are verified by numerical experiments with real data. Copyright Kluwer Academic Publishers 1992

Suggested Citation

  • A. Rikun, 1992. "On modeling incentive systems which utilize pollution charges for pollution abatement," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 2(6), pages 593-604, November.
    • Handle: RePEc:kap:enreec:v:2:y:1992:i:6:p:593-604
    DOI: 10.1007/BF00330285
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    References listed on IDEAS

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    1. Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
    2. Doede Wiersma, 1991. "Static and dynamic efficiency of pollution control strategies," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 1(1), pages 63-82, March.
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