International Tax and Public Finance

, Volume 2, Issue 2, pp 221–228 | Cite as

Environmental taxes on intermediate and final goods when both can be imported

  • James M. Poterba
  • Julio J. Rotemberg


One of the most difficult administrative problems in implementing broad-based environmental taxes concerns the tax treatment of imports, particularly imports of final goods that are producedusing intermediate goods that are taxed domestically. Provided there is no joint production, taxing imported final goods based on the amount of intermediate goods consumed in their domestic production will raise marginal costs by the same amount for domestic and foreign producers. This rule is impossible to implement when final goods are produced as joint products, however, as in the petroleum refining and petrochemical industries. In such cases arbitrary assignments of intermediate good inputs to final goods-for example, on the basis of relative output weight or value-are likely to change the relative marginal costs of domestic and foreign producers.

Key words

environmental taxes pigouvian taxes joint production 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Barthold, Thomas A. (1994). “Issues in the Design of Environmental Excise Taxes.”Journal of Economic Perspectives 8, 133–152.Google Scholar
  2. Braeutigam, Ronald R. (1980). “An Analysis of Fully Distributed Cost Pricing in Regulated Industries.”Bell Journal of Economics 11, 182–196.Google Scholar
  3. Burdick, Donald L., and William L. Leffler. (1990).Petrochemicals in Non-technical Language Tulsa: Penn-Well Press.Google Scholar
  4. Davie, Bruce F. (1995). “Border Tax Adjustments for Environmental Excise Taxes: The U.S. Experience.” Mimeo, U.S. Treasury Department, Washington, DC.Google Scholar
  5. Helpman, Elhanan, and Paul R. Krugman. (1989).Trade Policy and Market Structure. Cambridge, MA: MIT Press.Google Scholar
  6. Hoel, Michael. (1994). “The Role of a Carbon Tax in Environmental and Fiscal Policy.” Mimeo, Department of Economics, University of Oslo.Google Scholar
  7. Hufbauer, Gary C. (1993). “The Evolution of Border Tax Adjustments.” Mimeo, Institute for International Economics, Washington, DC.Google Scholar
  8. Leffler, William L. (1979).Petroleum Refining for the Non-technical Person. Tulsa: Petroleium Publishing.Google Scholar

Copyright information

© Kluwer Academic Publishers 1995

Authors and Affiliations

  • James M. Poterba
    • 1
  • Julio J. Rotemberg
    • 2
  1. 1.Department of Economics, E52-35DMassachusetts Institute of TechnologyCambridge
  2. 2.Sloan School of ManagementMassachusetts Institute of TechnologyCambridge

Personalised recommendations