Optimal Taxing for the Abatement of Water Pollution

The Dantzig-Wolfe decomposition algorithm is posited as a method of finding the optimal treatment configuration for meeting water quality standards along a river basin and simultaneously determining optimal pollution taxes to achieve this configuration when the central authority does not know treatment cost functions. Simulated use of the algorithm using actual data from the Miami River of Ohio indicates that the algorithm performs these tasks satisfactorily. The implications of this analysis are that a central authority can, through a planning (tatonnement) process involving proposed taxes and polluter responses, effectively determine a set of near-optimal pollution taxes without complete knowledge of treatment costs (i.e., without complete treatment cost functions) in relatively few iterations A detailed model of the constraint set is formulated in the appendix, which is available on microfiche along with the entire article. Order from the American Geophysical Union, Suite 435, 2100 Pennsylvania Ave., N.W., Washington D.C. 20037. Document W70-001; $1.00. Payment must accompany order.