Pollution taxes

Parry, I.W.H., 1995. Pollution taxes and revenue recycling, Journal of Environmental Economics and Management 29, S64-S77. 

In addition, member countries which have adopted tax incentives to encourage consumers to purchase low pollution vehicles should either exclude diesels from any tax credits or require them at a minimum to achieve 0.6 grams per test (ECE test) or 0.2 grams per mile (US test) particulate to qualify for low pollution tax credits. 

Why have cap-and-trade policies flourished in comparison to pollution taxes in the United States Perhaps most obviously, a system in which discharge permits are issued, but made saleable, looks rather like the regulatory system currently in place in the United States, with the added twist of marketability. Another reason has to do with the uncertainty each system creates. Specifically, under a cap-and-trade system, the total amount of pollution is firmly fixed-that is the purpose of the cap. What is uncertain are exactly where the emissions will occur (this depends upon who trades with whom), and how much an emissions permit (the right to emit one ton in a given year, say) will cost —the latter is determined in a competitive market. 

The choice between cap-and-trade systems and pollution taxes rests at least in part on the pollutant in question. For pollutants like sulfur dioxide, CFCs, or carbon dioxide that mix equally in the atmosphere and that pose few or no local health effects, cap-and-trade works well because we are unconcerned about where emissions take place. On the other hand, if we are concerned that limiting emissions might impose too big a burden on the economy, the pollution tax approach is best because sources know that they will never have to pay more for a ton of pollution discharged than the tax. Effluent charges also raise revenue—not a trivial issue in many places, including developing countries. 

Figure A13 shows the externality cost overview screen. From this screen, the user can explore the effects of pollution taxes for the default pollution-control technologies (Table A4). Additional options, including technology choices for pollution reduction, are accessed by clicking one...

How will all of this end up - for China and for the world We do not know Credit Suisse experts believe that the economic pressures of her environmental policies will lead to structural change which will increase use of natural gas (to 7%) and nuclear (to 4%) by 2020, while coal will decline from 68% to 64%, and pollution taxes may drive the worst offenders out of business after the shortage of recent years passes. ... 

Potential tax incentives. In an effort to promote pollution prevention, taxes may eventually need to be levied to encourage waste generators to consider reduction programs. Conversely, tax breaks could be developed for corporations that utilize pollution-prevention methods to foster pollution prevention. 

There has been extensive recent rethinking of the role of fees and fines as means of influencing industrial decision making with regard to investment in pollution control equipment and pollution-free processes. In their new roles, fees and fines take the form of tax write-offs and credits for polluhon control investment taxes on the sulfur and lead content of fuels continuing fines based on the pollution emission rate and effluent fees on the same basis. Tax write-offs and credits tend to be resisted by treasury officials because they diminish tax income. Air pollution control agencies tend to look with favor on such write-offs and credits because they result in air pollution control with minimal effort on the part of their staffs and with minimal effect on their budget. 

As environmental protection and recycling become more important, dumping and recycling charges and taxes will be used to control environmental pollution in the future. For the plant owner, this means an increase in the decommissioning costs. 

Emissions in excess of allotted levels are taxed. As an incentive to clean up emissions, companies that emit less than their allotted amounts are allowed to sell their unsued portions (so-called emission credits) to other companies. Several years ago, the Tennessee Valley Authority (TVA), which operates 11 coal-fired electricity plants, purchased emission credits from Wisconsin Power and Light. The TVA bought pollution rights for the emission of 1.00 X 10 tons of sulfur dioxide per year at a price of 275 per ton. How much will it cost to emit 1 mol of SO2 How many molecules can be emitted for 1.00 ... 

When the government wishes to encourage construction it can give permission for a fast tax write-off. This means the company can depreciate the plant much faster than it will wear out. This practice has been prevalent in war years when the government needed to have certain defense plants built. It has been proposed that this method might be used to encourage companies to install pollution-reducing systems. 

Sometimes these wastes are nontoxic and can be deposited in a sanitary landfill. This generally costs between 4 and 5 per ton.61 Landfill operations can, however, be expected to increase in price as land becomes scarcer, pollution laws become tougher, and maybe even disposal taxes are levied. 

CAC instruments use to be compared with MB instruments that are characterized by a private administration and enforcement system and stimulate indirectly the behavior of the firm. There are essentially two different types of those instruments taxes that are fees imposed on emitters proportionate to the total amount of emissions released into the environment (they could be divided into emission charges, product charges, and user charges) and marketable (or tradable) permit systems that provide a fixed number of permits equal to the allowed total emissions, distributing them among polluting firms in a specific area. 

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