Discussion Paper Series in Economics, Department of Economics, Norwegian School of Economics (NHH)
Atmospheric Externalities and Environmental Taxation.
Abstract: The paper reviews the theory of environmental taxation
under first best and second best conditions. It argues that negative
environmental externalities lead to reductions of the provision of public
goods, while investment in abatement increases the supply of public goods.
Together with optimal tax rules, the paper therefore also derives
conditions for the optimal use of resources on abatement. After brief
discussions of the dimensions of time and uncertainty, tax reform and the
double dividend, and taxes versus quotas, the optimal tax model is applied
to the problem of global warming with a discussion of the particular
incentive problems that arise in designing and implementing global climate
Keywords: Environmental taxation; Public goods; (follow links to similar papers)
JEL-Codes: D60; H41; H87; (follow links to similar papers)
27 pages, September 10, 2010
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