Ecotaxes on Polluting Inputs and Outputs

The use of taxes to put pressure on polluters has had mixed results internationally, according to this study of economic instruments (EIs) as a means for cleaning up environmental-hazards. The analysis identifies several key considerations in structuring effective ecotaxes, including trade-offs between environmental and other goals, the size of the tax base, distortions in prices, the possibility of phasing in the taxes, incentives for compliance, and the advisability of earmarking of funds for environmental protection. Industries in India covered in the discussion include makers of automobiles, coal, fertilizers, lead acid batteries, paper and pulp, pesticides, plastics, phosphate-based detergents, and rayon.

Raja J. Chelliah is the chairman of Madras School of Economics. Paul P. Appasamy and U. Sankar are both professors at the Madras School of Economics. Rita Pandey is a professor at the National Institute of Public Finance and Policy.