Sustainable DevelopmentSust. Dev. 6, 154–155 (1998)

BOOK REVIEW

ENVIRONMENTAL TAXES AND ECONOMIC WEL-FARE: REDUCING CARBON DIOXIDE EMISSIONS byAntonia Cornwell and John Creedy, 1997. Elgar, xi + 152pp, £39.95 (hbk). ISBN 1 85898 622 2TAXING AUTOMOBILE EMISSIONS FOR POLLUTIONCONTROL by Maureen Sevigny, 1998. Elgar, xiv + 115pp, £35 (hbk). ISBN 1 85898 767 9

Two welcome additions to Edward Elgar’s highly regardedNew Horizons in Environmental Economics Series. Both workscontribute to the growing literature on practical applicationsof environmental taxes. Cornwell and Creedy consider thecase of carbon taxes in Australia and Sevigny conducts ananalysis of taxation on automobile emissions in California’sSouth Coast air basin. The applicability of their approachesto other contexts is immediately apparent, and willundoubtedly be of interest to the target audience of policymakers, advisors to governments and academics. Intendedfor readers with a degree of prior knowledge, a level ofnumeracy is also essential to engage with the detail of theanalysis. The general arguments are however, constructedmethodically enough that an interested observer couldreasonably be expected to follow them.

Debates on environmental taxes have at times beendominated by concerns over the disproportionate effectthey are assumed to have on the less well off. The first ofthe two publications tackles that debate head on, adding toit with a coherent and structured analysis.The starting pointof Cornwell and Creedy is an estimation of the tax rateneeded to meet the Toronto Target (a reduction in CO2emissions by 20% of 1988 levels by 2005). They then builda picture of the distributional and welfare effects of a tax ondomestic fuel and a carbon tax. The same analysis is appliedto a hypothetical tax on food, to argue that a 30% tax ondomestic fuel would be less distributionally adverse than a15% tax on food. Compensation for the worst affected isconsidered in the form of a minimum income guarantee.

Throughout, Cornwell and Creedy are nothing if notup-front about the assumptions used in the analysis that arerightly described as ‘strong’. In every case the limitationsthey impose on the analysis and explanations for their useare given. One of the real strengths of the work is itsapplicability to other contexts where policy makers will face

CCC 0968-0802/98/030154–02 $17.50? 1998 John Wiley & Sons, Ltd and ERP Environment.

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similar problems of second best data on which to base theirown analysis.

The style is at times a little concise, typical of a journalarticle, and a little more explanation of some of the moretechnical aspects could have broadened the readership. Thechoice of the Toronto Target reductions is perhaps obsolete,these having been superseded by the Tokyo Protocol inwhich Australia successfully (some might say scandalously)negotiated an 8% increase in emissions from a 1990 base by2008/2012.

Pollution control measures adopted world-wide arepredominantly regulatory in nature. Where economicinstruments are used, these have typically been applied tolarge scale point sources, such as factories and powerstations.

Maureen Sevigny’s work is an attempt to bridge thegap between the widely accepted theoretical benefits ofemissions taxes and the lack of empirical work in the area ofmobile pollution sources. Motor vehicles are a major sourceof local air quality pollution problems, yet the closestgovernments come to taxing their emissions is to tax motorfuel. Sevigny demonstrates that using fuel consumption as aproxy for vehicle emissions and attempting to embody animplied emissions tax into fuel prices is considerably lessthan second best. Two introductory chapters set out thearguments for emissions taxes, and consider the possiblemeans of establishing the appropriate tax rate. It is arguedthat a tax per mile based on regularly tested emissionvolumes represents the most practical means of establishingcharges for vehicle owners. The postulated tax rate pervolume of emission proposed is based on the least costemission reduction technology available to stationarypollution sources in the area. Households with one, two ormore vehicles are modelled to indicate the extent to whichchanges in costs reduce the number of vehicle milestravelled. The postulated tax rates for hydrocarbons, COand NOx are applied to known data on vehicle ownershipcovering vehicle type and age. The analysis suggests thatfor the South Coast air-shed, considerable revenues couldbe raised and significant reductions in emissions andreplacement of older more polluting vehicles could beexpected.

Much of the power of the analysis is lost however, by thefailure to consider seriously the problems associated withthe proposed tax system. The possibilities of temporaryfixes and dishonesty are acknowledged, but dismissed as anenforcement rather than design issue. Policy makers may be

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more inclined to the view that if an enforcement problem isimplicit in the design, then the design itself is at fault. Thepossibility of households discounting future tax costs isreferred to but receives similar cursory treatment. This is ashame, since households with the most polluting vehicles(the poorest) are likely to have the highest time preferencerates for money to the extent that the current value ofexpected future costs are small.

Lastly, the tax design proposed is not explicit about thepoint of payment that might significantly influence thebehavioural effects being modelled. In Sevigny’s defence itis only fair to point to comprehensive lists of ideas for

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further work, and her own acknowledgement that thecurrent work represents a starting point.

If you only intend to add one or two books onenvironmental economics to your collection this year thenthese are probably not for you. If it is more likely to be 10or 12, then both the above works are worthy of seriousconsideration.

Evan WilliamsCentre for Corporate Environmental Management

Huddersfield University Business SchoolHuddersfield HD1 3DH UK

Sust. Dev. 6, 154–155 (1998)

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