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Optimal Environmental Taxation When Goods and Contamination are Durable

  • Sagasta Elorza, Amagoia

[EN] This paper analyzes the effects of optimal taxation on a polluting monopolist who produces a durable good and cannot precommit to future sale prices. The government establishes the taxes that maximize social welfare, measured as the present value of the sum of consumer surplus plus producer's gross profits minus environmental damage. The consequences of taxes on the production and monopolist's profits, consumer surplus, environmental damage and social welfare are analized. It is shown that optimal taxes increase social welfare and reduce environmental damage. However, the effets of taxes on monopolist's profits depend on the goverment's ability to establish different taxes in different periods and the durability of the pollution.

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File URL: http://hdl.handle.net/10810/5883
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Paper provided by Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística) in its series BILTOKI with number 1999-12.

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Date of creation: Nov 1999
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Handle: RePEc:ehu:biltok:199912
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Order Information: Postal: Dpto. de Econometría y Estadística, Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain
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