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Environmental Controls, Scarcity Rents, and Pre-Existing Distortions
Journal of Public Economics (2001)
  • Don Fullerton, University of Texas at Austin
  • Gilbert E. Metcalf
One might suppose that an emissions tax has an advantage over command and control (CAC) regulations since it raises revenue that can be used to cut other distorting taxes. In this paper, we show that the focus on revenue raising is misplaced. In a simple analytical general equilibrium model, we show that the same welfare effects of environmental protection can be achieved, by taxes that raise revenue, certain command and control regulations that raise no revenue, and even subsidies that cost revenue. Instead, the pre existing labor tax distortion is exacerbated by policies that generate privately-retained scarcity rents.
Publication Date
May, 2001
Citation Information
Don Fullerton and Gilbert E. Metcalf. "Environmental Controls, Scarcity Rents, and Pre-Existing Distortions" Journal of Public Economics Vol. 80 (2001)
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