Helge Berglann: Norwegian Agricultural Economics Research Institute, Postal: P.O.Box 8024 Dep, 0030 OSLO, Norway
Abstract: To mitigate pollution this note advocates a two-component system. The polluter pays for the damage he causes and for the opportunity to do so. The main motivation is to achieve Pareto e¢ ciency while avoiding problems caused by asymmetric information and strategic moves. The proposed regime induces each polluter to solve the same optimization problem as an altruistic planner. Since the monetary burden of the scheme matches a linear Pigouvian tax, it does not encourage firms to split or merge.
6 pages, June 10, 2004
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