Optimal carbon taxation is evaluated in a model where climate change affects productivity. With a numerical US economy model with preexisting taxes, the optimal carbon tax is found to exceed marginal social damage by 53 percent and "marginal private damage" (the sum of households?marginal...

This paper compares the optimal environmental tax with two alternative definitions of marginal environmental damages. One definition reflects the social marginal rate of substitution between income and the environment; the other reflects the sum of households' marginal willingness to pay. The...

The simple fact that environmental resources are endowments is found to have profound effects on their patterns of allocation with changes in income, population, and income inequality. For broad classes of theoretical models, and in Pareto efficient as well as decentralized economies,...

This note argues that the conclusions and inferences in a recent literature on second-best environmental taxation are due to the use of a particular definition of "marginal social damage," one that is not based on the marginal rate of substitution between income and the environment for the...