Empirical evidence indicates that imposing taxes on polluting emissions by firms
A)has no effect on the amount of pollution emitted.
B)does not give the government leeway to regulate more dangerous emissions differently than less dangerous emissions.
C)does reduce the amount of pollution emitted.
D)discourages firms from investing in new methods of pollution abatement.

Question

Quizplus · Accepted Answer

Numerous studies have shown that imposing taxes on polluting emissions by firms leads to a reduction in the amount of pollution emitted. This is because firms have an incentive to reduce their emissions in order to avoid paying higher taxes. This approach also gives the government the ability to regulate more dangerous emissions differently than less dangerous ones by levying higher taxes on the former. However, there is no evidence to suggest that such taxes discourage firms from investing in new methods of pollution abatement.

Empirical Evidence Indicates That Imposing Taxes on Polluting Emissions by Firms