Ex Post Evidence on Environmental Taxes: An Assessment of the French Tax on Air Pollution

Empirical evidence evaluating the e¢ciency of economic instruments is still rare, despite signi...cant theoretical advances over the last decades. The purpose of the paper is to evaluate one form of environmental taxation, the French tax on air pollution from 1990-99. While starting out in 1985 as a tax levied only on sulphur emissions, the tax base was subsequently extended to encompass also emissions of nitrogen oxides (NOx), hydrochloric acid (HCl), and volatile organic compounds (VOC). The revenues of the French tax on air pollution were earmarked for abatement subsidies and the ...nancing of air quality surveillance systems. We use a plant-level database on emissions, ...rm characteristics, taxes paid and subsidies received to evaluate the abatement elasticity with regard to the tax and the subsidies. Our ex post analysis also allows for an evaluation of the distributional impact of the earmarked tax on di¤erent industry sectors.