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You set the price of the tax equal to the mitigation cost. In this way consumers pay to mitigate. If mitigation is coat prohibitive, consumers substitute produ

You set the price of the tax equal to the mitigation cost. In this way consumers pay to mitigate. If mitigation is coat prohibitive, consumers substitute products that are not harmful. Edit: W.r.t. regressive taxation... No one has the right to force their externalities on someone else. Just because you are poor doesn't mean you can dump your garbage on my lawn because it's cheaper than paying to haul it to the dump.

LaurieKoudstaal 6y ago
That isn't how pigouvian taxes work. The point is adjusts the price so that it correctly includes all external costs not already reflected in the costs. It is not about raising revenue to deal with the problem, but changing relative incentives. For this reason, if the tax is regressive, its perfectly OK for the revenue to be redistributed in tax breaks to lower income.