Question

Polluters	C02 emiision per thousands
Buick	25
Toyota	15
BMW	20
Honda	15
Nissan	13
Chevy	28
Cadillac	38	Chart 1a shows 7 major polluters. Each polluter (a)If the government’s Ministry on Environment were planning to set a different tax rate so as to maximize tax revenue in the most efficient way possible, and they asked you for advice on how best to approach the problem, what would you tell them? You must use *appropriate* terms and concepts in your answer. (b)Suppose a a city council president argues that pollution abatement is only one goal for taxing these companies and that another goal is to generate tax revenue. Therefore, he recommends doubling the taxes proposed in part (a). How would you respond to this recommendation? You must use *appropriate* terms and concepts in your answer. To produce 1 ton of acid rain requires approximately 2.5 tons of CO2 emissions

Answer 1

a) In order to set different tax/environment tax on each polluter it is very necessary to make a balance between tax revenues and its cost to the emitter since a high tax will increase the cost for the each polluter and simultaneously high prices for their products and high purchasing cost for the end user/consumers and high tax will discourage the polluter to produce more since high tax will work for them as a total negative tax and negative incentive. So it is very very necessary to keep the tax at optimum level in order to encourage emitter to reduce pollution pear each unit of pollution generated, it is because too low rate of tax will encourage the polluter to pay tax and keep on producing and without thinking of social cost of emissions and emissions level. so a optimum level of tax by considering the level of pollution the polluter is emitting and how sensitive it is to control the emission levels and reduce the emission and simultaneously to increase the revenue from emission tax.

b) By considering the cut in emission levels, optimum level of tax in order not to discourage the polluters to produce and increase the cost for consumers and also considering the city council presidents arguments to double the tax levels set in part (a) i will recommend the middle path by ensuring that a balance should be maintained for the emission cost to polluters and cost to the end users/consumers of these polluters and by considering aim of doubling the revenues to the levels of (a) since to produce 1 ton of acid rain it requires 2.5 tons of CO2 emissions. I will consider who are the big emitters who are contributing more in polluting the environment and who are the low emitters of pollution who are emitting low level of pollutions and will try to fix the different tax rates for big polluter and for low polluter and will charge high tax from the big polluter and less tax/tax rates to the low emitter of pollution and this strategy will make sure increase in tax revenues as well as reduction in emission levels and this strategy will be a win win situation for all the emitter and for the tax revenue purposes.