The Role of Environmental Taxation: Economics and the Law

Handbook of Research on Environmental Taxation, Cheltenham, Edward Elgar, 2012, pp. 399-421

University of Groningen Faculty of Law Research Paper No. 2014/04

24 Pages Posted: 21 Dec 2013 Last revised: 11 Feb 2014

See all articles by Michael G. Faure

Michael G. Faure

University of Maastricht - Faculty of Law, Metro; Erasmus University Rotterdam (EUR) - Erasmus School of Law

Stefan E. Weishaar

Maastricht University - METRO Institute; University of Groningen - Faculty of Law

Date Written: 2012

Abstract

This contribution to the Handbook of Research on Environmental Taxation discusses the law and economics of environmental taxation. The chapter provides an overview of taxation and other incentive-based regulations from an environmental law and economics perspective by addressing their strengths and weaknesses. Issues such as flexibility and cost-effectiveness, and also their susceptibility to lobbying at the legislative level and to regulate capture, are examined. The chapter shows that it is not surprising that there differing approaches since none of the policy instruments (taxes, contracts, liability rules, regulation or market-based instruments) may alone be optimal to provide adequate incentives for pollution control. A combination may be necessary, ideally making optimal use of the advantages of each particular policy instrument. To some extent, this can be observed in practice as well. The chapter also discusses the necessity to search for optimal instrument mixes and shows how those mixes of instruments are also applied in practice, especially in the European Union. However, using a behavioural approach, the chapter also shows some of the limits of instrument mixes.

Keywords: environmental taxation, market-based instruments, economic instruments, incentives, emission trading, Coase Theorem, liability rules, negligence, strict liability, tort law, regulation, enforcement instrument mixes

JEL Classification: K32, K13

Suggested Citation

Faure, Michael G. and Weishaar, Stefan E., The Role of Environmental Taxation: Economics and the Law (2012). Handbook of Research on Environmental Taxation, Cheltenham, Edward Elgar, 2012, pp. 399-421; University of Groningen Faculty of Law Research Paper No. 2014/04. Available at SSRN: https://ssrn.com/abstract=2370360

Michael G. Faure (Contact Author)

University of Maastricht - Faculty of Law, Metro ( email )

PO Box 616
Maastricht, 6200 MD
Netherlands
+31 - 43 - 388 30 60 (Phone)
+31 - 43 - 325 90 91 (Fax)

HOME PAGE: http://www.michaelfaure.be

Erasmus University Rotterdam (EUR) - Erasmus School of Law ( email )

3000 DR Rotterdam
Netherlands

Stefan E. Weishaar

Maastricht University - METRO Institute ( email )

PO Box 616
Maastricht, 6200 MD
Netherlands

University of Groningen - Faculty of Law ( email )

9700 AS Groningen
Netherlands

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