Econometrica: Jan 1975, Volume 43, Issue 1

Rendement Qualitatif et Financement Optimal des Politiques d'Environnement

https://doi.org/0012-9682(197501)43:1<93:RQEFOD>2.0.CO;2-2
p. 93-114

Serge-Christophe Kolm

Many environment policies use two categories of instruments: a financial incentive (most often a tax) for "polluters," and direct undertakings or financing of some restorations or maintenances or improvements of environmental qualities. The financial consequences of such policies, when optimum, are important for considerations of public finance, decentralization (financial autonomy), and equity (must polluters pay?). They turn out essentially to depend upon the mathematical structure of, first, the "environment function," i.e., the way in which environment "qualities" depend upon both deteriorating and improving activities, and, second, the various constraints of the problem. Constraints which can be expressed by functions homogeneous of any degree are shown to have no direct financial effect. Apart from the constraints' effects, budgetary equilibrium, surplus or deficit are respectively given by environment functions which present constant, decreasing, or increasing "qualitative returns to scale," i.e., "weighted" homogeneity of degree zero, positive or negative. The opposite polar cases of "cleaning" and "dilution" types of improvement technology are presented, with some other mixed simple cases and a few examples of application of the results.

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