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Pigouvian tax, abatement policies and uncertainty on the environment

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Abstract

The paper examines the effects of environmental uncertainty on Pigouvian tax and abatement policy used, either separately or contemporaneously, to counteract pollution. We discuss these effects by introducing three kinds of risk: risk on the environmental quality, risk on the impact of pollution and risk on the impact of abatement. For each case we determine the conditions ensuring that risk increases the size of public intervention and provide an economic interpretation and some parallelisms with other risk problems. The last part of the paper generalizes some of our results to the case of N-th order risk changes.

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Authors and Affiliations

  1. Dipartimento di Economia Politica e Metodi Quantitativi, Università di Pavia, Pavia, Italy

    Donatella Baiardi

  2. Dipartimento di Economia, Università di Parma, Parma, Italy

    Mario Menegatti

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  1. Donatella Baiardi
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  2. Mario Menegatti
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Correspondence to Mario Menegatti.

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Baiardi, D., Menegatti, M. Pigouvian tax, abatement policies and uncertainty on the environment. J Econ 103, 221–251 (2011). https://doi.org/10.1007/s00712-011-0199-7

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  • DOI: https://doi.org/10.1007/s00712-011-0199-7

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