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What are the advantages and disadvantage of Pigouvian taxes, effluent taxes and marketable permits in terms...

What are the advantages and disadvantage of Pigouvian taxes, effluent taxes and marketable permits in terms of addressing negative pollution externalities?

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Answer #1

Pros of Pigouvian Taxes ,Effluent Taxes and Market Permits

1) Pigouvian taxes discourage behaviors that create negative externalities

2) These taxes create more efficiency in an economy which is something highly desirable on the whole.

Cons of Pigouvian Taxes, Effluent Taxes and Market Permits

1) These taxes are regressie and is a harsh burden for the poor.

2) Pigouvian Taxes can have many unanticipated negative effects, like the Groundwater Tax of Netherlands in 1995

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