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How Pollution Taxes May Increase Pollution and Reduce Net Revenues

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  • Fredriksson, Per G

Abstract

This paper develops a positive theory of pollution taxation by a federal authority when pollution abatement subsidies are used by local governments. Environmental and industry lobby groups influence governments with campaign contributions. First, pollution may increase in the pollution tax because the abatement subsidy increases (decreases) with the tax, and pollution increases (decreases) in the abatement subsidy. This occurs because the lobbying incentives change at a pollution tax reform. Second, pollution taxes may reduce net revenues because subsidy expenditures rise. Third, pollution may increase simultaneously as net revenues fall. Finally, the welfare effect of a pollution tax may be negative. Copyright 2001 by Kluwer Academic Publishers

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  • Fredriksson, Per G, 2001. "How Pollution Taxes May Increase Pollution and Reduce Net Revenues," Public Choice, Springer, vol. 107(1-2), pages 65-85, April.
    • Handle: RePEc:kap:pubcho:v:107:y:2001:i:1-2:p:65-85
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    5. John K. Wilson & Richard Damania, 2003. "Corruption, Political Competition and Environmental Policy," School of Economics and Public Policy Working Papers 2003-09, University of Adelaide, School of Economics and Public Policy.
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    7. Henrik Hammar & Löfgren Åsa & Thomas Sterner, 2004. "Political Economy Obstacles to Fuel Taxation," The Energy Journal, , vol. 25(3), pages 1-17, July.
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    9. Fünfgelt, Joachim & Schulze, Günther G., 2016. "Endogenous environmental policy for small open economies with transboundary pollution," Economic Modelling, Elsevier, vol. 57(C), pages 294-310.
    10. Weijiang Liu & Tingting Liu, 2022. "Exploring the Impact and Path of Environmental Protection Tax on Different Air Pollutant Emissions," IJERPH, MDPI, vol. 19(8), pages 1-14, April.

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