NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Optimal Environmental Taxation in the Presence of Other Taxes: General Equilibrium Analyses

A. Lans Bovenberg, Lawrence H. Goulder

NBER Working Paper No. 4897
Issued in October 1994
NBER Program(s):   PE

This paper examines the optimal setting of environmental taxes in economies where other, distortionary taxes are present. We employ analytical and numerical models to explore the degree to which, in a second best economy, optimal environmental tax rates differ from the rates implied by the Pigovian principle (according to which the optimal tax rate equals the marginal environmental damages). Both models indicate, contrary to what several analysts have suggested, that the optimal tax rate on emissions of a given pollutant is generally less than the rate supported by the Pigovian principle. Moreover, the optimal rate is lower the larger are the distortions posed by ordinary taxes. Numerical results indicate that previous studies may have seriously overstated the size of the optimal carbon tax by disregarding pre-existing taxes.

download in pdf format
   (501 K)

email paper

This paper is available as PDF (501 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w4897

Published: American Economic Review, Vol. 86, no. 4 (September 1996): 985-1006. Published as "Costs of Environmentally Motivated Taxes in the Presence of Other Taxes: General Equilibrium Analyses", NTJ, Vol. 50, no. 1 (March 1997. citation courtesy of

Users who downloaded this paper also downloaded these:
Bovenberg and Goulder w8458 Environmental Taxation and Regulation
Bovenberg and Goulder w5117 Costs of Environmentally Motivated Taxes in the Presence of Other Taxes:General Equilibrium Analyses
Goulder w4896 Environmental Taxation and the "Double Dividend:" A Reader's Guide
Metcalf w7917 Environmental Levies and Distortionary Taxation: Pigou, Taxation, and Pollution
Fullerton, Leicester, and Smith w14197 Environmental Taxes
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us