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The General Equilibrium Incidence Of Environmental Mandates, Don Fullerton, Garth Heutel
The General Equilibrium Incidence Of Environmental Mandates, Don Fullerton, Garth Heutel
Don Fullerton
Pollution regulations affect factor demands, relative returns, production, and output prices. In our model, one sector includes pollution as an input that can be a complement or substitute for labor or capital. For each type of mandate, we find conditions where more burden is on labor or on capital. Stricter regulation does not always place less burden on the better substitute for pollution. Also, restrictions on pollution per unit output create an “output-subsidy effect” on factor prices that can reverse the usual output and substitution effects. We find analogous effects for a restriction on pollution per unit capital.
Environmental Taxes, Don Fullerton, Andrew Leicester, Stephen Smith
Environmental Taxes, Don Fullerton, Andrew Leicester, Stephen Smith
Don Fullerton
This paper provides an overview of key economic issues in the use of taxation as an instrument of environmental policy. Part A reviews economic arguments for using taxes and other market mechanisms in environmental policy, discusses the choice between taxes directly on measured emissions or less-directly related to emissions, and considers the value of the revenue from environmental taxes. We argue that environmental tax revenues do not significantly alter economic constraints on tax policy, and that environmental taxes need to be designed and justified primarily by the cost-effective achievement of environmental goals. Part B discusses key areas where environmental taxes …