Optimal Environmental Taxation in the Presence of Other Taxes: General Equilibrium Analyses / A. Lans Bovenberg, Lawrence H. Goulder.

Format:

Book

Author/Creator:

Bovenberg, A. Lans.

Contributor:

National Bureau of Economic Research.

Goulder, Lawrence H.

Series:

Working Paper Series (National Bureau of Economic Research) no. w4897.

NBER working paper series no. w4897

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Optimal Environmental Taxation in the Presence of Other Taxes

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1994.

Summary:

This paper examines the optimal setting of environmental taxes in economies where other, distortionary taxes are present. We employ analytical and numerical models to explore the degree to which, in a second best economy, optimal environmental tax rates differ from the rates implied by the Pigovian principle (according to which the optimal tax rate equals the marginal environmental damages). Both models indicate, contrary to what several analysts have suggested, that the optimal tax rate on emissions of a given pollutant is generally less than the rate supported by the Pigovian principle. Moreover, the optimal rate is lower the larger are the distortions posed by ordinary taxes. Numerical results indicate that previous studies may have seriously overstated the size of the optimal carbon tax by disregarding pre-existing taxes.

Notes:

Print version record

October 1994.