A Damage Based Tax Mechanism for Regulation of Hazardous Waste

Abstract

The Pigouvian prescription for pollution damage requires a per-unit taxequal to the monetary value of marginal external cost (MEC). However, in this tradition,few economists have proposed a damage-based mechanism to regulate hazardous waste.Using damage scores from the Waste Minimization Chemical List of the United StatesEnvironmental Protection Agency(EPA), this paper develops such an approach. Marginaltax rates correspond to environmental damage. Efficiency increases in the presence ofreliable EPA damage scores, linear marginal damage, and accurate monetary valuesassigned to MEC (H23).