Environmental Economics and Policy Studies

, Volume 21, Issue 1, pp 141–169 | Cite as

Taxes versus emissions trading system: evaluating environmental policies that affect multiple types of pollution

  • Boon-Ling YeoEmail author
  • Andrew Coleman
Research Article


This paper examines the interaction of different policies used to control two types of agricultural pollution. Pollution control policy is efficient when both pollution types are controlled by taxes, although a tax increase on one type of pollution can increase the quantity of another type of pollution if farm inputs are substitutes. However, if one of the pollutions is controlled by a local emissions trading scheme, and another pollution type is taxed, then the pollution type which is taxed becomes less responsive to a change in its own tax levels. This policy scenario results in inefficient levels of environmental pollution outcomes unless the cap for the local emissions trading scheme is constantly being shifted in response to the tax.


Agricultural environmental policy Climate change Nitrate pollution Agricultural land-use change 



We are grateful for the funding received from the Royal Society of New Zealand and the National Science Foundation (NSF) under Grant No. 1210213. This research is made possible through the support provided by Motu Economics and Public Policy in Wellington, New Zealand and the University of California, Davis Outreach and International Programs Seed Grant. We would also like to thank Debbie Niemeier for her support and would especially thank Suzi Kerr and Michael Springborn for their valuable guidance, suggestions, and comments.


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Copyright information

© Society for Environmental Economics and Policy Studies and Springer Japan KK, part of Springer Nature 2018

Authors and Affiliations

  1. 1.University of CaliforniaDavisUSA
  2. 2.Department of EconomicsUniversity of OtagoDunedinNew Zealand
  3. 3.New Zealand Productivity CommissionWellingtonNew Zealand

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