Externalities as the status quo: Federal application of environmental charges in the United States

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Department of Social Sciences


Conceptualized as early as 1920 by English economist Arthur Cecil Pigou, but not formalized until later work in the 1970s and 1990s, “environmental charges” suggest the revenue burden of governance could be shifted from economic “goods” to environmental “bads.” While their association with Pigouvian taxes would suggest that environmental charges are applied as a policy instrument to encourage the reduction or elimination of environmental externalities, their application at the federal level in the United States suggests this is not the case. As part of a review of environmental charges in the United States, this paper postulates that federally applied environmental charges accept environmental externalities as the status quo and are instead intended to recover the government's cost in addressing the environmental externality in conformance with the polluter pays principle.

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Environmental Policy and Governance