Optimal Taxing of Water Pollution

(1) Within the context of the model, optimal taxes on water pollution do exist; (2) The condition for these taxes to raise revenue sufficient to pay for the cost of low flow augmentation has been derived; (3) The social cost of cleaner water has been derived; (4) The ‘waste’ load discharge method of taxation has been shown to be preferable to the ‘increased permissible waste load method’ when C′F ‐ C < 0; (5) The two schemes have been compared for a special case when C'F ‐ C > 0.