Environmental costs of residuals: a characterization of efficient tax policies.

Abstract

Durable goods leave residuals after being retired from use. If the environmental costs of the residuals are external to consumers and producers of the good, then overproduction and excess residuals will result. Ad valorem taxes are show to be ineffective in eliminating this externality. The efficient regulatory policy is shown to be based on a pigouvian tax.Externalities; Pollution control; Optimal taxation; Durable goods; Residuals;