Weighted location differential tax in environmenta

Authors: George E Halkos Dimitra C Kitsou

Publish Date: 2016/10/21

Volume: 20, Issue: 1, Pages: 1-15

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Abstract

Based on Pigou’s view environmental taxation increases the cost of polluting activities reflecting the true social cost imposed on societies by the environmental damage caused by these activities Imposing an emissions tax is a standard way to internalize the external pollution damages into producers’ decisionmaking An efficient outcome is attained when marginal external cost of emissions is identical for all producers and equal to marginal abatement cost of each producer When producers are heterogeneous however a uniform emission charge usually fails to satisfy these requirements In this case ideally taxes should be differentiated across pollution sources to consider variations in the marginal damage caused by their respective activities In this paper the total pollution cost is related with contaminated locations and a weightedlocationdifferentiated tax together with a corresponding index that adjusts taxation to the damages caused is proposed The weights follow a gammaorder normal distribution which is described by shape location and scale parameters allowing for some flexibility in the measure of spatially differentiated environmental impactsThis research has been cofinanced by the European Union European Social Fund—ESF and Greek national funds through the Operational Program “Education and Lifelong Learning” of the National Strategic Reference Framework NSRFResearch Funding Program Heracleitus II Investing in knowledge society through the European Social Fund We thank also three anonymous reviewers for helpful comments on an earlier draft of this paper Any remaining errors are the authors’ responsibilityA more general form of the multivariate distribution was investigated with an extra shape parameter introducing through Logarithm Sobolev Inequalities LSI a new family of univariate γordered Normal distribution the rm N gamma rho mu varSigma which generalizes the Normal Distribution rm Nrho mu varSigma through an additional parameter gamma in mathbbR left 01 right Kitsos and Tavoularis 2009 Kitsos and Toulias 2010 Kitsos et al 2012 The new generalized Normal distribution commonly referred as γordered Normal distribution

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