| Many environmentalists and policymakers are shifting their focus from media-specific pollution problems to product-specific, life-cycle environmental problems. In this paper, we develop a model of production and consumption that incorporates life-cycle environmental externalities-specifically, an upstream manufacturing byproduct, air or water pollution from manufacturing, and downstream solid waste disposal. We then use the model to derive optimal government policies to address all three externalities. We assume throughout that a Pigovian tax on waste disposal is precluded because of the potential for illegal dumping. We then examine four cases: one in which Pigovian taxes on the upstream externalities are feasible, one in which such taxes are infeasible,... |
