"Emission taxes are a nice theoretical idea but they are not a practical solution for most local air pollution problems." Do you agree or disagree? Discuss
I agree with the statement. Emission taxes are not a practical
solution for most local air pollution problems. To implement
emission taxes, we must have full information about the abatement
costs. Setting a tax rate is a one-size fits all solution which may
not be best for all because of following reasons:
a. Setting a too high rate may push the firms to buy wrong
machinery so as to minimize emissions but could affect their
profits.
b Setting . a too low rate could imply that the firms won't invest in curbing pollution and may instead hard the environment.
c. The marginal abatement cost function of the firms is not likely to be stable over time. This can create problems for the policy makers in deciding the rate of taxation.
d. Considering a huge number of pollutants, it may not be practically possible for the policy to set emission tax for each of the pollution.
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