Environmental controls, scarcity rents, and pre-existing distortions

Don Fullerton, Gilbert E. Metcalf

Research output: Contribution to journalArticlepeer-review


One might suppose that an emissions tax has an advantage over command and control (CAC) regulations since it raises revenue that can be used to cut other distorting taxes. In this paper, we show that the focus on revenue raising is misplaced. In a simple analytical general equilibrium model, we show that the same welfare effects of environmental protection can be achieved, by taxes that raise revenue, certain command and control regulations that raise no revenue, and even subsidies that cost revenue. Instead, the pre-existing labor tax distortion is exacerbated by policies that generate privately-retained scarcity rents.

Original languageEnglish (US)
Pages (from-to)249-267
Number of pages19
JournalJournal of Public Economics
Issue number2
StatePublished - May 2001
Externally publishedYes


  • Command and control regulations
  • Emissions tax
  • H2
  • Q2
  • Scarcity rents

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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