Compare Pigouvian tax levied on input, output, emissions, or use of technology

Compare Pigouvian tax levied on input, output, emissions, or use of technology

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Expert Solution

Pigouvian tax is the tax that is paid to the government as a compensation to the negative externality being created by excess production of output and resulting emission beyond the permissible limits, it is used to curb the output level and by that, inputs used for the production and emission released in the form of pollutants are controlled. In contrast to it, use of technology helps to produce the same level of output, but reduced level of emission as pollution. So, clean and green technology is preferred to reduce the pollutants being released. Here, investment in technology is done by the firm and it is a one time investment other than and M&O cost if any. But, Pigouvian tax is recurring in nature. Each time a production level exceeds, then tax is applied.
Further, the use of technology directly benefits to the society, but Pigouvian tax goes to the government and the government runs program to reduce the pollution that is already created. So, the benefits due to tax, is delivered indirectly.

Rahul Sunny answered 1 year ago

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