Microeconomic Implications of Environmental Tax

Abstract

The devastation of the environment occurs mainly as a result of intensive economic development. The study of its consequences is a subject of interest of experts from various professional orientations. Economic theorists, ecologists and all those involved in the creation of solutions in the field of environmental policy, product designers and new technological procedures constantly point to the need for alignment of economic development goals and the environmental consequences that economic progress causes. Excluding natural disasters, external diseconomies in production are the most powerful cause of environmental degradation, regardless of whether they occur in the form of hydro, aero or lithium pollution. The aim of this paper is to show how the introduction of pollution taxes affects the behavior of market players, the amount of pollution and the magnitude of social well-being. In most cases, the market mechanism cannot adequately address the problem of negative externalities in production. But, on the other hand, this state, because of limited information on the consequences of environmental damage or for other reasons, through its intervention in the market, can produce an outcome worse than that created by the uncontrolled market.