IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

Voluntary internalisations facing the threat of a pollution tax

  • Franz Wirl


  • Claus Huber

This paper investigates how the threat of a pollution tax fosters voluntary arrangements under private information and how such arrangements (of the take-it-or-leave-it type) will look like. The objective is (i), to address a topical and policy relevant problem, and (ii), to highlight that the optimal contracts exhibit substantial variations, degrees of complexity and uncommon features. If the pollutee offers an arrangement (and this is the more likely and also more interesting case) the spectrum of solutions covers six different cases: 'no distortion at the top', 'no distortion at the bottom', 'no distortion in the interior' and a boundary solution (a pseudo contract of duplicating the tax outcome) applicable either in all instances of the agent's benefit or coupled with one of the conventional mechanisms. If the polluter offers a contract, the optimal incentive scheme is countervailing with the consequence that the signs of the payments are reversed, that the property of no distortion holds at both ends and that the polluter's best strategy is to duplicate the tax outcome if the actual damage is around the expected value. The government's threat encourages contracting and improves the allocation beyond what an actual intervention could achieve. This provides a potential role for governments in an otherwise Coasean framework. Copyright Springer-Verlag Berlin/Heidelberg 2005

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Springer in its journal Review of Economic Design.

Volume (Year): 9 (2005)
Issue (Month): 4 (December)
Pages: 337-362

in new window

Handle: RePEc:spr:reecde:v:9:y:2005:i:4:p:337-362
Contact details of provider: Web page:

Order Information: Web:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:spr:reecde:v:9:y:2005:i:4:p:337-362. 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 (Christopher F Baum)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.