CAC versus Direct versus Indirect Taxes
One of the main sources of water pollution is agricultural runoff. Consider three options to control this problem:
(1) a CAC requirement prohibiting irrigation ditches from draining directly into streams or rivers;
(2) a direct tax on chemical emissions from farms into streams or rivers and
(3) an indirect tax placed on pesticide purchases. Evaluate these three options in terms of feasibility, enforceability, and-assuming they could be implemented-cost effectiveness and actual pollution reduction.