IDEAS home Printed from https://ideas.repec.org/a/kap/enreec/v8y1996i4p461-471.html
   My bibliography  Save this article

Uncertainty over future environmental taxes

Author

Listed:
  • Bruce Larson
  • George Frisvold

Abstract

Besides static efficiency properties, environmental policies should be evaluated in terms of their longer-run impacts on investment and technological change to reduce pollution and degradation of natural resources. Using a stochastic dynamic programming approach, this paper analyzes how uncertainty about a future environmental tax on a polluting input alters investment in resource conservation and how such investment affects future demand for the polluting input. The impact on investment depends crucially on price elasticities of demand and on the manner in which investment shifts and rotates the demand schedule for the polluting input in the future. The expectation of a higher tax does not necessarily create stronger incentives for investment in resource conservation. More uncertainty about future policies does encourage investment if it makes a firm more responsive to future price changes and discourages investment if it makes a firm less responsive to price changes. Copyright Kluwer Academic Publishers 1996

Suggested Citation

  • Bruce Larson & George Frisvold, 1996. "Uncertainty over future environmental taxes," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 8(4), pages 461-471, December.
  • Handle: RePEc:kap:enreec:v:8:y:1996:i:4:p:461-471
    DOI: 10.1007/BF00357414
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/BF00357414
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Darwin, R. F., 1992. "Natural resources and the marshallian effects of input-reducing technological changes," Journal of Environmental Economics and Management, Elsevier, vol. 23(3), pages 201-215, November.
    2. Marin, Alan, 1991. "Firm incentives to promote technological change in pollution control: Comment," Journal of Environmental Economics and Management, Elsevier, vol. 21(3), pages 297-300, November.
    3. Orr, Lloyd, 1976. "Incentive for Innovation as the Basis for Effluent Charge Strategy," American Economic Review, American Economic Association, vol. 66(2), pages 441-447, May.
    4. McCain, Roger A, 1978. "Endogenous Bias in Technical Progress and Environmental Policy," American Economic Review, American Economic Association, vol. 68(4), pages 538-546, September.
    5. Binswanger, Hans P, 1974. "A Microeconomic Approach to Induced Innovation," Economic Journal, Royal Economic Society, vol. 84(336), pages 940-958, December.
    6. Hartman, Richard, 1976. "Factor Demand with Output Price Uncertainty," American Economic Review, American Economic Association, vol. 66(4), pages 675-681, September.
    7. Pindyck, Robert S, 1991. "Irreversibility, Uncertainty, and Investment," Journal of Economic Literature, American Economic Association, vol. 29(3), pages 1110-1148, September.
    8. Mendelsohn, Robert, 1986. "Regulating heterogeneous emissions," Journal of Environmental Economics and Management, Elsevier, vol. 13(4), pages 301-312, December.
    9. Meyer, Jack, 1987. "Two-moment Decision Models and Expected Utility Maximization," American Economic Review, American Economic Association, vol. 77(3), pages 421-430, June.
    10. Marin, A., 1978. "The choice of efficient pollution policies: Technology and economics in the control of sulphur dioxide," Journal of Environmental Economics and Management, Elsevier, vol. 5(1), pages 44-62, March.
    11. Turnovsky, Stephen J, 1973. "Production Flexibility, Price Uncertainty and the Behavior of the Competitive Firm," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(2), pages 395-413, June.
    12. Magat, Wesley A., 1978. "Pollution control and technological advance: A dynamic model of the firm," Journal of Environmental Economics and Management, Elsevier, vol. 5(1), pages 1-25, March.
    13. Chavas, Jean-Paul & Bishop, Richard C. & Segerson, Kathleen, 1986. "Ex ante consumer welfare evaluation in cost-benefit analysis," Journal of Environmental Economics and Management, Elsevier, vol. 13(3), pages 255-268, September.
    14. Milliman, Scott R. & Prince, Raymond, 1989. "Firm incentives to promote technological change in pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 17(3), pages 247-265, November.
    15. Downing, Paul B. & White, Lawrence J., 1986. "Innovation in pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 13(1), pages 18-29, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Löfgren, Åsa & Millock, Katrin & Nauges, Céline, 2008. "The effect of uncertainty on pollution abatement investments: Measuring hurdle rates for Swedish industry," Resource and Energy Economics, Elsevier, vol. 30(4), pages 475-491, December.
    2. Hammar, Henrik & Löfgren, Åsa, 2007. "Explaining adoption of end of pipe solutions and clean technologies," Working Papers 102, National Institute of Economic Research.
    3. Löfgren, Åsa & Millock, Katrin & Nauges, Céline, 2007. "Using Ex Post Data to Estimate the Hurdle Rate of Abatement Investments - An Application to the Swedish Pulp and Paper Industry and Energy Sector," Working Papers in Economics 249, University of Gothenburg, Department of Economics.
    4. Carlsson, F., 1999. "Incentive-based environmental regulation of domestic civil aviation in Sweden," Transport Policy, Elsevier, vol. 6(2), pages 75-82, April.
    5. repec:hal:journl:halshs-00343702 is not listed on IDEAS
    6. N.K. Warner-Merl, 1999. "An Emissions Tax in Siberia: Economic Theory, Firm Response, and Noncompliance in Imperfect Markets," Working Papers ir99027, International Institute for Applied Systems Analysis.
    7. repec:hal:journl:halshs-00261523 is not listed on IDEAS
    8. Hammar, Henrik & Löfgren, Åsa, 2010. "Explaining adoption of end of pipe solutions and clean technologies--Determinants of firms' investments for reducing emissions to air in four sectors in Sweden," Energy Policy, Elsevier, vol. 38(7), pages 3644-3651, July.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:enreec:v:8:y:1996:i:4:p:461-471. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: http://www.springer.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.