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Pigouvian tax, abatement policies and uncertainty on the environment

  • Donatella Baiardi
  • Mario Menegatti


The paper examines the effects of environmental uncertainty on Pigouvian tax and abatement policy used, either separately or contemporaneously, to counteract pollution. We discuss uncertainty in three aspects: environmental quality, pollution effect and the impact of abatement. For each case we determine the conditions ensuring that uncertainty increases the size of public intervention and provide an economic interpretation and some parallelisms with other risk problems. The last part of the paper generalizes some of our results to the case of N-th order risk changes.

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Article provided by Springer in its journal Journal of Economics.

Volume (Year): 103 (2011)
Issue (Month): 3 (July)
Pages: 221-251

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Handle: RePEc:kap:jeczfn:v:103:y:2011:i:3:p:221-251
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