The major difficulty with using a tax on pollution instead of a fixed-percentage reduction regulation is

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Establishing the optimal size of the tax is a major difficulty with using a tax on pollution instead of a fixed-percentage reduction regulation. The optimal size of the tax needs to be high enough to incentivize companies to reduce their pollution but not so high that it becomes too burdensome for them. This requires careful analysis and modeling. However, once the optimal tax rate is established, a pollution tax can be an effective way to reduce pollution because it provides companies with flexibility in how they reduce their emissions while also incentivizing them to do so.

The Major Difficulty with Using a Tax on Pollution Instead