An Ethical Pollution Tax

Through theory and numerical simulations, I explore how a pollution tax can be designed to accommodate ethical objections.

Through theory and numerical simulations, I explore how a pollution tax can be designed to accommodate ethical objections. I consider four types of objections that have been raised by ethicists – based on equity concerns, incommensurability, civic responsibility, and commodification. In each case, I theoretically derive a tax designed to respond to the objection, and quantitatively, using a general equilibrium model calibrated to the U.S. economy and carbon dioxide pollution, I show how these accommodations affect the magnitude of the tax and the resulting emissions level. Some accommodations likely have small effects on the carbon tax rate, while others can cause the tax rate to increase fivefold.