Porter's Combination Tax and Subsidy for Controlling Pollution

Robert E. Kohn

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DOI: 10.2190/JAVL-DV4H-Q218-ERHR

Abstract

Porter once proposed a combination tax and subsidy for controlling pollution, but then rejected it as impractical [1]. Upon further analysis, the concept now appears to have desirable properties. Mathematically, the Porter combination is equivalent to a single tax on emissions and, like the tax, fosters economic efficiency. The two sets of data on which Porter's scheme would be based are periodically updated and published by the U. S. Environmental Protection Agency. Because the polluting firm would prepare two reports, one for the operating tax and the other for the abatement subsidy, there is a cross-check on the data that would encourage more accurate reporting by firms.

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