The Case for a Two-Part Instrument: Presumptive Tax and Environmental Subsidy
This paper builds two simple general equilibrium models to demonstrate the equivalence between the Pigovian tax and the combination of a presumptive tax and an environmental subsidy. A presumptive tax is a tax that is imposed under the presumption that all production uses a dirty technology or all consumption goods become waste. The environmental subsidy is then provided only to the extent that production uses a cleaner technology or that consumption goods are recycled. To analyze the usefulness of the tax-subsidy combination, we review conceptual considerations regarding its implementation and practical considerations regarding its actual use throughout the world. While the tax-subsidy combination is increasingly being used, in the form of a deposit-refund system, we argue that more flexible interpretations are important to explore. The two parts of such a policy do not have to apply to the same side of the market. The tax and subsidy do not have to equal one another, and they can apply to different goods altogether. Compared to the Pigovian tax, a two-part instrument may be easier to enforce, may be easier to enact, and can still force the market to recognize the social cost of disposal.
|Date of creation:||Apr 1997|
|Publication status:||published as Environmental and Public Economics: Essays in Honor of Wallace E. Oates, Panagaria, A., P. Portney and R. Schwab, eds., Cheltenham, UK: Edward Elgar, 1999, pp. 32-57.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Swierzbinski Joseph E., 1994. "Guilty until Proven Innocent-Regulation with Costly and Limited Enforcement," Journal of Environmental Economics and Management, Elsevier, vol. 27(2), pages 127-146, September.
- Fullerton Don & Kinnaman Thomas C., 1995.
"Garbage, Recycling, and Illicit Burning or Dumping,"
Journal of Environmental Economics and Management,
Elsevier, vol. 29(1), pages 78-91, July.
- Don Fullerton & Thomas C. Kinnaman, 1993. "Garbage, Recycling, and Illicit Burning or Dumping," NBER Working Papers 4374, National Bureau of Economic Research, Inc.
- de Bovenberg, A Lans & Mooij, Ruud A, 1994. "Environmental Levies and Distortionary Taxation," American Economic Review, American Economic Association, vol. 84(4), pages 1085-1089, September.
- Bovenberg, A.L. & de Mooij, R.A., 1994. "Environmental levies and distortionary taxation," Other publications TiSEM 4b32deaa-ec2f-4de7-b59b-9, Tilburg University, School of Economics and Management.
- Fullerton, Don, 1997. "Environmental Levies and Distortionary Taxes: Comment," American Economic Review, American Economic Association, vol. 87(1), pages 245-251, March.
- Don Fullerton, 1996. "Why Have Separate Environmental Taxes?," NBER Chapters,in: Tax Policy and the Economy, Volume 10, pages 33-70 National Bureau of Economic Research, Inc.
- Don Fullerton, 1995. "Why Have Separate Environmental Taxes?," NBER Working Papers 5380, National Bureau of Economic Research, Inc.
- Palmer, Karen & Sigman, Hilary & Walls, Margaret, 1997. "The Cost of Reducing Municipal Solid Waste," Journal of Environmental Economics and Management, Elsevier, vol. 33(2), pages 128-150, June.
- Palmer, Karen & Walls, Margaret & Sigman, Hilary, 1996. "The Cost of Reducing Municipal Solid Waste," Discussion Papers dp-96-35, Resources For the Future.
- Porter, Richard C., 1978. "A social benefit-cost analysis of mandatory deposits on beverage containers," Journal of Environmental Economics and Management, Elsevier, vol. 5(4), pages 351-375, December.
- Dinan Terry M., 1993. "Economic Efficiency Effects of Alternative Policies for Reducing Waste Disposal," Journal of Environmental Economics and Management, Elsevier, vol. 25(3), pages 242-256, November.
- Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249.
- Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521311120, February.
- Glenn Jenkins & RANJIT LAMECH, 1992. "Market-Based Incentive Instruments For Pollution Control," Development Discussion Papers 1992-02, JDI Executive Programs.
- Eskeland, Gunnar S, 1994. "A Presumptive Pigovian Tax: Complementing Regulation to Mimic an Emissions Fee," World Bank Economic Review, World Bank Group, vol. 8(3), pages 373-394, September.
- Richard C. Porter, 1983. "Michigan's Experience with Mandatory Deposits on Beverage Containers," Land Economics, University of Wisconsin Press, vol. 59(2), pages 177-194.
- Miedema, Allen K., 1983. "Fundamental economic comparisons of solid waste policy options," Resources and Energy, Elsevier, vol. 5(1), pages 21-43, March.
- Bovenberg, A Lans & de Mooij, Ruud A, 1997. "Environmental Levies and Distortionary Taxation: Reply," American Economic Review, American Economic Association, vol. 87(1), pages 252-253, March.
- Hilary A. Sigman, 1995. "A Comparison of Public Policies for Lead Recycling," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 452-478, Autumn.
- Lee, Dwight R. & Graves, Philip E. & Sexton, Robert L., 1992. "Controlling the abandonment of automobiles: Mandatory deposits vs fines," Journal of Urban Economics, Elsevier, vol. 31(1), pages 14-24, January.
- Revesz, Richard L. & Stavins, Robert N., 2007. "Environmental Law," Handbook of Law and Economics, Elsevier.
- Cropper, Maureen L & Oates, Wallace E, 1992. "Environmental Economics: A Survey," Journal of Economic Literature, American Economic Association, vol. 30(2), pages 675-740, June. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:5993. 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: ()
If references are entirely missing, you can add them using this form.