A Taxation Scheme for River Quality control

Abstract A taxation scheme for river quality control is presented and discussed in this paper. The basic idea is that the charge imposed on each polluter entering the system is equal to the surplus of damage it generates in the system. The main characteristic is that under quite general conditions the corresponding Nash equilibrium, which is typical of non-cooperative situations, turns out to be Pareto optimal too. In order to show the effects of possible alternative measures of the environmental damage, a simulation study of the industrial development of the Rhine river basin is carried out. Moreover, the differences on the final results due to the use of different types of river quality models are also pointed out and the final conclusion is that the taxation scheme seems to be flexible and well suited for a wide range of applications characterized by different physical and economical conditions.