Environmental Protection:

Implications of Using Pollution Taxes to Supplement Regulation

RCED-93-13: Published: Feb 17, 1993. Publicly Released: Mar 19, 1993.

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Pursuant to a congressional request, GAO examined the feasibility and implications of using economic incentives, including taxes on emissions of pollutants or harmful substances, to supplement federal efforts to control, reduce, and prevent pollution.

GAO found that: (1) the Environmental Protection Agency (EPA) and state and local governments do not have sufficient resources to effectively regulate and control all of the substances identified in legislation as harmful; (2) taxes on emissions of pollutants and on the harmful substances themselves could supplement regulatory efforts to meet the objectives of existing environmental laws; (3) pollution taxes could lower the costs of controlling pollution, address pollution that historically has not been well controlled, and generate significant revenues; (4) although it may be easier to tax substances rather than limit and regulate use of substances, a product tax would penalize all uses, regardless of the degree of risk posed, of a product; (5) a pollution tax that addresses all possible risks posed by different uses of a substance could be complicated and costly to enforce; (6) pollution taxes must also consider the risks posed by the incentive to use a different, untaxed harmful substance; and (7) pollution taxes could be phased in, beginning with low levels, to give substance users time to adapt to the taxes and avoid unnecessary costs and to allow regulators time to determine the appropriate level of taxes.

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