This paper explores the effects of an environmental tax reform on pollution, economic growth and welfare in an … endogenous growth model with pre-existing tax distortions. We find that a shift in the tax mix away from output towards pollution … determines the positive effect of lower aggregate pollution on the productivity of capital. The second channel is a shift in the …

Many pollution-related industries wield strong political influence and can e.ectively veto policy initiatives that … permits or by exempting some inframarginal emissions from a pollution tax.However, such policies compel the government to … this constraint diminishes relative to the other e.ciency costs of pollution-control.We also calculate the compensation …