Self-Selection and Optimal Nonlinear Effluent Charges

This paper proposes an optimal nonlinear effluent-charge system forenvironmental pollution control. This system achieves the first-bestoptimum through a self-selecting mechanism under asymmetric information.The proposed system can also control the level of revenues so as to reducethe excess burden of environmental taxation, and discriminate among thepolluters. The paper also compares this system with the conventional lineareffluent-charge system and discusses some economic implications ofimplementing the system. Copyright Kluwer Academic Publishers 2000