Anti-Pollution Tax Policy: A Viability Approach

Aubin, J.-P. (1993). Anti-Pollution Tax Policy: A Viability Approach. IIASA Working Paper. IIASA, Laxenburg, Austria: WP-93-052

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Abstract

Why do anti-pollution tax increases happen in such a discontinuous way, excluding more progressive continuous evolution which looks more rational? Why does it happen in the last moment, long before it could be implemented? Why do some tax rates, once chosen, look to be locked-in forever? These are some questions -- high on IIASA's agenda -- that viability theory attempts to answer.

We shall present in the first section the main feature and objectives of viability theory and a nontechnical presentation of its main concepts. We then devote the second section to a very simple model describing possible antipollution tax policies to regulate polluting production in face of demand, illustrating the general concepts introduced in the first section.

Several lessons can be drawn from this example. For instance, a same recipe (keep the tax constant) can have opposite consequences on the growth of production. A second one is that the intuition elaborated in a static framework may sometimes mislead us when evolution is present, by suggesting that such or such result, which makes sense in a static world, may have perverse effects in a dynamic one.

But it is forbidden to draw more conclusions than these modest models conceal. However, if a given reasoning is not validated in the case of such a simple model, it will not be valid in a more complex one.

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