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On the Regulatory Choice of Refunding Rules to Reconcile the ‘Polluter Pays Principle’ and Pigovian Taxation: An Application

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  • Athanasios Kampas

    (Department of Agricultural Economics and Development, Agricultural University of Athens, Iera Odos 75, 11855 Athens, Greece)

  • Laurent Franckx

    (Department of Economics and Management, Royal Military Academy, Avenue de la Renaissance 30, 1000 Brussels, Belgium)

Abstract

The ‘polluter pays principle’ (PPP) is one of the four principles that govern the European Union's environmental policy. Although PPP justifies Pigovian taxation as a legitimate policy means to internalise externalities, there is a potential contradiction between PPP and Pigovian taxation depending upon the definition of pollution control costs. We summarise this debate and focus on the lump-sum refunding of tax revenues in order to reconcile the PPP and Pigovian taxation. We propose equity as the guiding principle to select among various refunding schemes, and empirically examine a specific application.

Suggested Citation

  • Athanasios Kampas & Laurent Franckx, 2005. "On the Regulatory Choice of Refunding Rules to Reconcile the ‘Polluter Pays Principle’ and Pigovian Taxation: An Application," Environment and Planning C, , vol. 23(1), pages 141-152, February.
    • Handle: RePEc:sae:envirc:v:23:y:2005:i:1:p:141-152
    DOI: 10.1068/c04101s
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    References listed on IDEAS

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    1. Fischer, Carolyn, 2001. "Rebating Environmental Policy Revenues: Output-Based Allocations and Tradable Performance Standards," Discussion Papers 10709, Resources for the Future.
    2. Paul Burrows, 1979. "Pigovian Taxes, Polluter Subsidies, Regulation, and the Size of a Polluting Industry," Canadian Journal of Economics, Canadian Economics Association, vol. 12(3), pages 494-501, August.
    3. Herrero, Carmen & Villar, Antonio, 2001. "The three musketeers: four classical solutions to bankruptcy problems," Mathematical Social Sciences, Elsevier, vol. 42(3), pages 307-328, November.
    4. Andreas Lange & Till Requate, 2000. "Pigouvian Taxes in General Equilibrium with a Fixed Tax Redistribution Rule," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 2(1), pages 25-42, January.
    5. Ekins, Paul, 1999. "European environmental taxes and charges: recent experience, issues and trends," Ecological Economics, Elsevier, vol. 31(1), pages 39-62, October.
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