Pigouvian tax
Pollution pricing mechanism
A Pigouvian tax is a levy designed to correct for negative externalities—costs that economic activities impose on third parties.
The classic example is a carbon tax, which makes polluters pay for environmental damage their emissions cause.
Named after economist Arthur Pigou, the idea is that pricing in social costs aligns private incentives with public welfare: A Pigouvian tax on gasoline would account for pollution and congestion costs.
- externalityUncompensated effect on others
- market failureInefficient resource distribution
- carbon taxLevy on fuel combustion
- carbonSixth element, atomic symbol C
- pollutionEnvironmental harm from waste
incentive · market · correction · welfare · efficiency · emission · deadweight · social cost · social · cost · spillover · negative · alcohol · tobacco · congestion · congestion pricing · sugar · economist
- economicssupply and demand, inflation, GDP, GNP, gross domestic product
- public financepublic debt, budget deficit, tax revenue, budgets, expenditure
- taxationtax, income tax, sales tax, tax return, tax refund
Pigouvian taxsubsidy
Financial assistance from government
tax credit · bounty · rebate · government subsidy · government grant
Pigouvian taxlaissez-faire
Noninterference in commerce
free market · deregulation · non-intervention · voluntary agreement · cap-and-trade