Arguments for an emission tax:
- An emission tax makes polluters pay for the external cost
imposed by them
- Such a tax helps in achieving the socially optimal level of
production and makes production socially efficient
- Such a tax increases government revenue, which can be spent on
the social sector or technological innovation for cleaner
technologies
- Emission taxes would encourage firms to find cleaner and
greener techniques of production
- Such taxes can help prevent environmental degradation
Arguments for an emission tax:
- A tax burden might reduce investment and economic activities by
firms
- Firms may become more secretive in polluting to avoid
taxes
- Firms might shift production to countries which do not have
emission taxes
- It is a difficult task to measure external costs and determine
the amount of tax to be charged
- It is a difficult task to monitor firms and collect taxes