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Extent of Expected Pigouvian Taxes and Permits for Environmental Services in a General Equilibrium Model with a natural capital constraint

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  • Tobon Orozco, David
  • Molina Guerra, Carlos
  • Vargas Cano, John Harvey

Abstract

This paper presents a general equilibrium model to analyze the influence that a contaminating sector has on a natural system’s capacity of resilience, the provision of a public utility service and social welfare, in which the level and capacity to respond to resilience are uncertain, so a probability distribution for the growing loss of resilience with pollution going from a prudent state to an imprudent is defined. And examines first the incidence of expected Pigouvian taxes and finds that these taxes are not enough to maintain resilience because of the cumulative effect of pollution and also that society prefers a prudent tax. Furthermore, the transaction of Permits for Environmental Services (PES) between sector that provides the public utility service and the contaminating sector is allowed. This shows a redistribution of resources very much in favor of the contaminating sector, and there are no incentives to invest in these payments unless the affected have additional objectives for the maximization of private benefit.

Suggested Citation

  • Tobon Orozco, David & Molina Guerra, Carlos & Vargas Cano, John Harvey, 2016. "Extent of Expected Pigouvian Taxes and Permits for Environmental Services in a General Equilibrium Model with a natural capital constraint," Borradores Departamento de Economía 15258, Universidad de Antioquia, CIE.
  • Handle: RePEc:col:000196:015258
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    References listed on IDEAS

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    Cited by:

    1. Tobón Orozco, David & Molina, Carlos & Vargas, Harvey, 2018. "Can environmental taxes and payments for ecosystem services regulate pollution when the resilience of water bodies is surpassed?," Borradores Departamento de Economía 17179, Universidad de Antioquia, CIE.

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    More about this item

    Keywords

    Contaminación ambiental; incertidumbre; resiliencia; modelo de equilibrio general; impuestos pigouvianos; pagos por servicios ambientales;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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