10.2190/JAVL-DV4H-Q218-ERHR JAVLDV4HQ218ERHR 1 Porter's Combination Tax and Subsidy for Controlling Pollution 179 188 20020509 20020509 20020509 20020509 JAVLDV4HQ218ERHR.pdf http://baywood.metapress.com/link.asp?target=contribution&id=JAVLDV4HQ218ERHR 3 Robert E. Kohn Southern Illinois University, Edwardsville 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. R. C. Porter, The Long-Run Asymmetry of Subsidies and Taxes as Antipollution Policies, <i>Water Resources Research, 10</i>, pp. 415-417, 1974. R. E. Kohn, Transactions Costs and the Optimal Instrument and Intensity of Air Pollution Control, <i>Policy Sciences</i>, in press. J. D. Harford, Firm Behavior under Imperfectly Enforceable Pollution Standards and Taxes, <i>Journal of Environmental Economics and Management, 5</i>, pp. 26-43, 1978. J. D. Harford, Violation-Minimizing Fine Schedules, <i>Atlantic Economic Journal</i>, pp. 49-56, 1987. W. Harrington, Enforcement Leverage when Penalties Are Restricted, <i>Journal of Public Economics, 37</i>, pp. 29-53, 1988. C. S. Russell, W. Harrington, and W. J. Vaughan, <i>Enforcing Pollution Control Laws</i>, Resources for the Future, Washington, D. C., 1986. E. H. Mantell, On Economics and the Politics of Environmental Protection: Policy Conflicts Can Be Mitigated by Selective Enforcement and Tax-Financed Subsidies, <i>American Journal of Economics and Sociology, 44</i>, pp. 435-447, 1985. R. H. Coase, The Problem of Social Cost, <i>Journal of Law and Economics, 3</i>, pp. 1-44, 1960. D. F. Bramhall and E. S. Mills, A Note on the Asymmetry between Fees and Payments, <i>Water Resources Research, 2</i>:3, pp. 615-616, 1966. A. M. Freeman, III, Bribes and Charges: Some Comments, <i>Water Resources Research, 3</i>, pp. 287-288, 1967. R. B. Palmquist, Pollution Subsidies and Multiple Local Optima, <i>Land Economics, 66</i>, pp. 394-401, 1990. A. V. Kneese and K.-G. Maler, Bribes and Charges in Pollution Control: An Aspect of the Coase Controversy, <i>Natural Resources Journal, 13</i>, pp. 705-716, 1973. G. Yohe and P. MacAvoy, A Tax Cum Subsidy Regulatory Alternative for Controlling Pollution, <i>Economics Letters, 25</i>, pp. 177-182, 1987. G. Yohe, More on the Properties of a Tax Cum Subsidy Pollution Control Strategy, <i>Economics Letters, 31</i>, pp. 193-198, 1989. R. E. Kohn, <i>A Linear Programming Model for Air Pollution Control</i>, MIT Press, 1978. R. E. Kohn, Variable Outputs along a Production Possibility Frontier with Inputs Constant by Choice, <i>Rivista Internazionale di Scienze Economiche e Commerciali, 36</i>, pp. 837-846, 1989. R. E. Kohn, Nonconvexity in Shibata and Winrich, <i>Osaka Economic Papers, 40</i>, pp. 250-261, 1991. R. E. Kohn, Efficiency in Abatement and Avoidance, <i>Socio-economic Planning Sciences, 22</i>:4, pp. 153-156, 1988. G. Tullock, Asymmetry between Bribes and Charges: A Comment, <i>Water Resources Research, 2</i>:4, pp. 854-855, 1966. U. S. Environmental Protection Agency, <i>Compilation of Air Pollutant Emission Factors</i>, (3rd Edition), AP-42, Parts A, B, U. S. Government Printing Office, Washington, D. C., 1977.