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An Emissions Tax in Siberia: Economic Theory, Firm Response, and Noncompliance in Imperfect Markets


  • N.K. Warner-Merl


The study sets out to discover the most important variables affecting the performance of an emissions tax in the context of a transition economy. An evaluation of the Siberian Pollution database confirms the acute severity of air pollution. Moving from the fact that the region has implemented an emissions charge system, the author examines some of the key theoretical variables explaining the degree of success of an emissions tax. After evaluating these variables, the author finds that most writings have underplayed or missed the most important factor affecting the implementation and functioning of an emissions tax in a transitional economy. Before implementing a market-oriented environmental policy, firms must respond to incentives in formal markets. These sources view the restructuring and environmental problem as a one of moving firms closer to formal markets, about which most Western models make their assumptions. However, the author implements a "compliance response boundary" framework, finding that the degree of market orientation of a firm may determine its response to the emissions tax. If firms fall outside of the compliance wedge, policy makers might expect the emissions tax to perform poorly in meeting policy goals of abatement and revenue. In this case, the tax provides few benefits in terms of enhancing efficiency, improving environmental conditions, or allowing "double dividends."

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  • N.K. Warner-Merl, 1999. "An Emissions Tax in Siberia: Economic Theory, Firm Response, and Noncompliance in Imperfect Markets," Working Papers ir99027, International Institute for Applied Systems Analysis.
  • Handle: RePEc:wop:iasawp:ir99027

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    References listed on IDEAS

    1. Fischer, Stanley & Sahay, Ratna & Vegh, Carlos, 1998. "From transition to market: Evidence and growth prospects," MPRA Paper 20615, University Library of Munich, Germany.
    2. Bruce Larson & George Frisvold, 1996. "Uncertainty over future environmental taxes," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 8(4), pages 461-471, December.
    3. Andreoni, James & Levinson, Arik, 2001. "The simple analytics of the environmental Kuznets curve," Journal of Public Economics, Elsevier, vol. 80(2), pages 269-286, May.
    4. Magat, Wesley A., 1978. "Pollution control and technological advance: A dynamic model of the firm," Journal of Environmental Economics and Management, Elsevier, vol. 5(1), pages 1-25, March.
    5. Clifford Gaddy & Barry W. Ickes, 1998. "To Restructure or Not to Restructure: Informal Activities and Enterprise Behavior in Transition," William Davidson Institute Working Papers Series 134, William Davidson Institute at the University of Michigan.
    6. Harford, Jon D., 1978. "Firm behavior under imperfectly enforceable pollution standards and taxes," Journal of Environmental Economics and Management, Elsevier, vol. 5(1), pages 26-43, March.
    7. Downing, Paul B. & Watson, William Jr., 1974. "The economics of enforcing air pollution controls," Journal of Environmental Economics and Management, Elsevier, vol. 1(3), pages 219-236, November.
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