3/30/2005

Emission Taxes

The article on Emission Taxes is talking about how the government sets an amount of taxes that companies pay for every unit of pollution that they produce. With this certain policy there is a couple of advantages, which are it makes businesses internalize negative externality costs, and can solve the problem of economic inefficiency by allowing firms to maximize profit and pollute at the most efficient level. This way there will be less pollution because companies will want to avoid the tax. When thinking about it that way I think that emission taxes would not be a bad idea, because there would be less pollution. The only problem with emission taxes is that the government would have to carefully measure how much to tax each company.

2 comments:

Rex said...

I heard about a program similar to this one a few weeks ago. They were selling vouchers for pollution. The more vouchers companies purchased the more they could poulet. In a way I think this idea of taxation is just because it makes company’s pay for the damage they are doing to the environment.

Dr. Tufte said...

-1 on Rex's comment for a spelling error.

Pollution taxes and vouchers are a way of internalizing the pollution externality. Firms are quite willing to do this if the market is set up correctly.

We will see an example of this when we do the Tragedy of the Commons experiment.