TY  - JOUR
AU  - Bovenberg,A. Lans
AU  - Goulder,Lawrence H.
TI  - Optimal Environmental Taxation in the Presence of Other Taxes: General  Equilibrium Analyses
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4897
PY  - 1994
Y2  - October 1994
UR  - http://www.nber.org/papers/w4897
L1  - http://www.nber.org/papers/w4897.pdf
N1  - Author contact info:
Lawrence H. Goulder
Department of Economics
Landau Economics Building 328
Stanford University
Stanford, CA  94305
Tel: 650/723-3706
Fax: 650/725-5702
E-Mail: goulder@stanford.edu
AB  - 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.
ER  -