POLLUTION TAXES, SUBSIDIES, AND RENT SEEKING

In assessing the impact of pollution taxes and subsidies against the reference grid of a Coasean system of property rights assignment, we show that both policy tools give rise to rent seeking and non-optimal results. In contrast to the conventional analysis of environment policy, congestion, entry by subsidized polluters, political competition for a share of the general public fund, and migration to regions endowed in environmental resources are seen as sources of rent dissipation, to be subtracted from the welfare gain of pollution control policies.