Document Type


Publication Date



One of the most known analyses of the environmental problem is the discussion of the externalities as a market failure and the solutions that could be offered by public policies and law to deal with them. The classic discussion of the opposed ideas of Pigou and Coase has been renewed nowadays in the discussions of the option between command and control measures, taxation of emissions and promotion of pollution reduction through a carbon emissions reductions trade system, related with the climate changes. Generally considering, the Pigouvian model suggests taxation over polluting activities. Coase has criticized the approach of the economists after Pigou who accepted the so-called Pigouvian taxes as the solution to externalities. The possibilities of transacting over the social costs were the subject discussed in his “The problem of social cost”. Therefore, the main aspect of the discussion in the environmental field is whether the market can lead to the achievement of goals of environment protection instead of, or in addition to a system of taxation over polluting activities.


Paper delivered at SELA 2008, Property Rights, in Buenos Aires, Argentina, as part of the panel on “Property Rights, Development and the Environment.”