Environmental Externalities, Abatement Behavior and Consumption Taxes

This paper explores how the disexternality effects of polluting consumption will affect economic welfare in the long run. It is assumed that polluting consumption and environmental quality may be technically convertible at a given rate. We first consider the case where abatement behavior is fixed or absent. We then consider the case where voluntary abatement is actually employed. Using both static and dynamic models of environmental quality, this paper explores the normative role of consumption taxes that could internalize both static and dynamic failures