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Optimal Green Taxation With Both Emission and Commodity Taxes

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Listed:
  • Basharat A.K. Pitafi

    (Department of Economics, University of Hawaii at Manoa)

  • James A. Roumasset

    (Department of Economics, University of Hawaii at Manoa)

Abstract

Several authors have argued that the second-best environmental tax on a “dirty good” is less than marginal emission damage associated with its consumption. These studies limit their analysis to cases in which emissions can only be reduced by a reduction of the dirty good. With a more general specification that allows abatement through input substitution, we show that the direct emissions tax cannot be less than marginal emission damage, regardless of the normalization.

Suggested Citation

  • Basharat A.K. Pitafi & James A. Roumasset, 2002. "Optimal Green Taxation With Both Emission and Commodity Taxes," Working Papers 200208, University of Hawaii at Manoa, Department of Economics.
    • Handle: RePEc:hai:wpaper:200208
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    References listed on IDEAS

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    More about this item

    Keywords

    Second-best environmental taxation; Pigouvian taxation; tax normalization; Revenue recycling; Tax interaction;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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