How standards drive taxes: the political economy of tailpipe pollution
To control tailpipe pollution, governments often use environmental product standards and consumption taxes in conjunction (for example, the use of fuel economy standards and gasoline taxes to restrict automobile pollution in the US). Further, the choice of standards and consumption taxes is often in...
| Autores principales: | , |
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| Formato: | Journal Article |
| Lenguaje: | Inglés |
| Publicado: |
Walter de Gruyter GmbH
2007
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| Acceso en línea: | https://hdl.handle.net/10568/171873 |
| _version_ | 1855519225377980416 |
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| author | Gulati, Sumeet Roy, Devesh |
| author_browse | Gulati, Sumeet Roy, Devesh |
| author_facet | Gulati, Sumeet Roy, Devesh |
| author_sort | Gulati, Sumeet |
| collection | Repository of Agricultural Research Outputs (CGSpace) |
| description | To control tailpipe pollution, governments often use environmental product standards and consumption taxes in conjunction (for example, the use of fuel economy standards and gasoline taxes to restrict automobile pollution in the US). Further, the choice of standards and consumption taxes is often independently influenced by special interests. For example, domestic producers have the incentive to influence environmental product standards, and likewise, domestic consumers have the incentive to influence the choice of the consumption tax. In this paper we explore the political link between environmental standards and consumption taxes in the presence of independent special interests. We find that despite the independence of special interests, the political outcome is inextricably linked. This political link is different from the welfare maximizing second-best link usually expected between two related policies, and is crucial in correctly anticipating policy outcomes. Specifically, we find that the government's choice of an environmental standard influences political incentives in the choice of the consumption tax. As the environmental standard falls, a higher demand for the environmentally damaging product develops. This higher demand increases the incentives for consumers to lobby for lower consumption tax. Under certain conditions, this political link is large enough to result in a complementary relationship between the two policies in equilibrium. The complementary relationship implies that a lower standard results in a lower consumption tax and vice versa when the standard is higher. |
| format | Journal Article |
| id | CGSpace171873 |
| institution | CGIAR Consortium |
| language | Inglés |
| publishDate | 2007 |
| publishDateRange | 2007 |
| publishDateSort | 2007 |
| publisher | Walter de Gruyter GmbH |
| publisherStr | Walter de Gruyter GmbH |
| record_format | dspace |
| spelling | CGSpace1718732025-01-29T12:58:54Z How standards drive taxes: the political economy of tailpipe pollution Gulati, Sumeet Roy, Devesh taxes environmental factors pollution To control tailpipe pollution, governments often use environmental product standards and consumption taxes in conjunction (for example, the use of fuel economy standards and gasoline taxes to restrict automobile pollution in the US). Further, the choice of standards and consumption taxes is often independently influenced by special interests. For example, domestic producers have the incentive to influence environmental product standards, and likewise, domestic consumers have the incentive to influence the choice of the consumption tax. In this paper we explore the political link between environmental standards and consumption taxes in the presence of independent special interests. We find that despite the independence of special interests, the political outcome is inextricably linked. This political link is different from the welfare maximizing second-best link usually expected between two related policies, and is crucial in correctly anticipating policy outcomes. Specifically, we find that the government's choice of an environmental standard influences political incentives in the choice of the consumption tax. As the environmental standard falls, a higher demand for the environmentally damaging product develops. This higher demand increases the incentives for consumers to lobby for lower consumption tax. Under certain conditions, this political link is large enough to result in a complementary relationship between the two policies in equilibrium. The complementary relationship implies that a lower standard results in a lower consumption tax and vice versa when the standard is higher. 2007 2025-01-29T12:58:54Z 2025-01-29T12:58:54Z Journal Article https://hdl.handle.net/10568/171873 en Limited Access Walter de Gruyter GmbH Gulati, Sumeet; Roy, Devesh. 2007. How standards drive taxes: the political economy of tailpipe pollution. The B.E. Journal of Economic Analysis & Policy 7(1): 9. https://doi.org/10.2202/1935-1682.1489 |
| spellingShingle | taxes environmental factors pollution Gulati, Sumeet Roy, Devesh How standards drive taxes: the political economy of tailpipe pollution |
| title | How standards drive taxes: the political economy of tailpipe pollution |
| title_full | How standards drive taxes: the political economy of tailpipe pollution |
| title_fullStr | How standards drive taxes: the political economy of tailpipe pollution |
| title_full_unstemmed | How standards drive taxes: the political economy of tailpipe pollution |
| title_short | How standards drive taxes: the political economy of tailpipe pollution |
| title_sort | how standards drive taxes the political economy of tailpipe pollution |
| topic | taxes environmental factors pollution |
| url | https://hdl.handle.net/10568/171873 |
| work_keys_str_mv | AT gulatisumeet howstandardsdrivetaxesthepoliticaleconomyoftailpipepollution AT roydevesh howstandardsdrivetaxesthepoliticaleconomyoftailpipepollution |