I recently learned about pigovian taxes.
Basically, if a factory is pumping toxic chemical waste into a nearby river (assuming this is legal), they would be doing harm to society, but would be disposing of their trash in the most economical way possible. To combat this harm to society, governments made this practice illegal. If the company continued to pump waste into the river, they would be charged a very high amount so that the river could be cleaned up and they would rethink their waste disposal system. This charge is essentially a very strict pigovian tax.
I then realized that coal plants are harming society, but they aren't paying for it. A pigovian/pollution/carbon tax should be instituted to fix the market inefficiency, right? How are these companies getting away with this?
Thanks.
Basically, if a factory is pumping toxic chemical waste into a nearby river (assuming this is legal), they would be doing harm to society, but would be disposing of their trash in the most economical way possible. To combat this harm to society, governments made this practice illegal. If the company continued to pump waste into the river, they would be charged a very high amount so that the river could be cleaned up and they would rethink their waste disposal system. This charge is essentially a very strict pigovian tax.
I then realized that coal plants are harming society, but they aren't paying for it. A pigovian/pollution/carbon tax should be instituted to fix the market inefficiency, right? How are these companies getting away with this?
Thanks.
Pigovian Tax
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