Spatial economic theory of pollution control

Journal Article · Tue Jun 01 04:00:00 EDT 1976 · J. Environ. Econ. Manage.; (United States)

DOI:https://doi.org/10.1016/0095-0696(76)90010-3· OSTI ID:7353581

Mathur, V K

In February 1972 the Nixon Administration proposed a tax on sulfur oxide emissions, beyond the Federal standards, of electric power plants. It was hoped that such a tax would discourage power plant locations in heavily polluted areas like urban areas. Assuming that such a tax varies over space because pollution is not invariant over space, the spatial theory of the firm as presented in this paper casts doubt on the efficacy of such a pollution tax to achieve the desired goal of the Administration. In particular, it is shown that the cost-minimizing spatial firm would abate its pollution in response to a tax by either changing its location or by reducing waste through process change or by using a transportable abatement good if the tax savings due to the change in marginal abatement through location change per unit change in abatement is greater than or equal to transport rate on the abatement good. If the goal of the firm is to maximize profits, the desired outcome would follow if, in addition to the fulfillment of the above condition, the percentage change in the delivered price of raw material (situated at one end of the linear location space) per unit distance is greater than or equal to the percentage change in net marginal revenue, i.e., marginal revenue net of transport cost per unit of output. In simple terms, the conclusions of this paper raise doubts regarding the effectiveness of a pollution tax in curtailing pollution of a firm that is operating in a space economy; this outcome is peculiar to a spatial firm. Sufficient conditions also have been obtained when land input is included in the production function of the firm.

• Research Organization: Cleveland State Univ.
• OSTI ID: 7353581
• Journal Information: J. Environ. Econ. Manage.; (United States), Journal Name: J. Environ. Econ. Manage.; (United States) Vol. 3:1; ISSN JEEMD
• Country of Publication: United States
• Language: English

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