The issue of the possible adverse effects of a reduction in pollution on the economy is a very real one for China … dimension - the pollution reduction is likely to have significantly different effects across the regions and so possibly … tax on pollution and a subsidy on abatement activity. We help elucidate this policy choice by exploring the tax …

efficient in controlling pollution when there is no uncertainty. We show that this is not the case if some consumers (firms …, local governments) are morally concerned about pollution and the pollution price is inefficiently low for political reasons … to reduce pollution, while price regulation makes these efforts effective. …