This comprehensive and accessible textbook addresses important relationships between economics and environmental policy, highlighting in particular the role of taxation. It also connects environmental policy to social accounting by describing how measures of welfare and sustainable development depend on whether policies successfully internalize market failures.
The authors discuss how the modern literature on environmental taxation and tradable permits has evolved. Environmental taxation is examined from a purely corrective perspective, and as part of a broader system of optimal taxation that reflects distributional objectives. Cost benefit rules of environmental policy reforms are also examined in various contexts.
Key features include:
- Examination of optimal tax policy in static and dynamic general equilibrium models with environmental externalities
- Examination of cost benefit rules for environmental policy reforms
- Essential historical background to the modern literature on environmental policy
- Discussion of measures of welfare and sustainable development
- Environmental policy from a fiscal federalism perspective.
This textbook will be essential reading for those studying environmental economics and environmental policy, working effectively as both an in-depth supplementary text in general courses on environmental economics and a strong main source for environmental policy courses.
‘This new textbook presents a detailed analysis of the theoretical insights which economics has been able to shed on the issue of pollution control in both static and dynamic models. The text will be very useful to PhD students who are interested in modelling pollution taxes and tradeable permit markets. A fascinating extension to how governments can correct market failures with respect to possible “catastrophic” problems brought about by investments in nuclear energy is also presented. The second part of the book extends the analysis, looking at the problem of measuring social welfare over time, and in particular how a genuine savings indicator can be produced, and then adjusted for imperfections in the economy. This links to current theoretical and policy work on “inclusive wealth” and natural capital, which is proving very influential within and beyond economics. The issues of commodity taxes, environmental policy within a federal system, and how best to respond to transboundary externalities such as climate change are also analysed. For those readers looking for a detailed, thoughtful and technical treatment of these subjects, this book will provide a valuable resource.’
– Nick Hanley, University of St Andrews, UK
, Professor of Economics, Kenneth Backlund
, Assistant Professor of Economics and Karl-Gustaf Löfgren
, Professor of Economics, Umeå University, Sweden.