Scandinavian Working Papers in Economics

Working Paper Series,
Uppsala University, Department of Economics

No 1999:14: On Environmental Taxation under Uncertainty

Sören Blomquist () and Thomas Aronsson ()
Additional contact information
Sören Blomquist: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden
Thomas Aronsson: Department of Economics, Postal: University of Umeå, SE-901 87 Umeå, Sweden

Abstract: This paper addresses optimal taxation, when the relationship between consumption and environmental damage is uncertain and treated as a random variable by policy makers. The main purpose is to analyze how additional uncertainty about this relationship affects the optimal unit tax on the consumption good that is causing environmental damage. We find that the optimal response to this tax depends on (i) the attitudes towards risk and (ii) how other policy instruments affect the demand for the good that is causing damage to the environment.

Keywords: Green taxes; Uncertainty; Optimal taxation

JEL-codes: D62; D80; H21; Q20

15 pages, August 10, 1999

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Published as
Sören Blomquist and Thomas Aronsson, (2003), 'On Environmental Taxation Under Uncertain Environmental Damage', Environmental and Resource Economics, vol 24, pages 183-196

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