Emission taxes are always socially efficient because they satisfy the equimarginal principle.
Emission taxes are always cost effective because they satisfy the equimarginal principle.They are only socially efficient if they result in the socially efficient level of emissions.

Question

Quizplus · Accepted Answer

Emission taxes may not always result in the socially efficient level of emissions. This depends on the level of the tax and the elasticity of demand for the polluting activity. However, they can be cost-effective as they provide incentives for firms to reduce emissions at the lowest possible cost. The equimarginal principle ensures that firms have an incentive to reduce emissions until the marginal abatement cost is equal across all polluters, but it does not guarantee that the socially optimal level of emissions will be achieved.

Emission Taxes Are Always Socially Efficient Because They Satisfy the Equimarginal