The Pigouvian Tax Rule in the Presence of an Eco-Industry
Bernard Sinclair-Desgagné, Alain-Désiré Nimubona
Pigouvian taxes,Environment industry
Climate Change and Sustainable Development
Pollution abatement goods and services are now largely being delivered by a specialized “eco-industry.” This note reconsiders Pigouvian taxes in this context. We find that the optimal emission tax will depart from the marginal social cost of pollution according to the polluters’ and the environment firms’ relative market power.