Pollution charges with imperfect monitoring

Pollution is a negative externality derived from car emissions. This book studies different systems of urban charges. In order to levy the optimal second-best tax to reduce the emissions and the congestion in a city centre the regulator implements two different system of taxations. One is a system with a unique lump-sum tax and the other is a system with two different lump-sum taxes. The results from the model show that the system with a unique tax is more efficient in terms of congestion and pollution with respect to the one with two different taxes. But, with two differentiated taxes the revenues are higher than those in a system with a unique tax, and this system of taxation is the fairest system for drivers in terms of pollution (who pollutes more pays more). The author finds these results in a real case of study, the Ecopass scheme and the Area C scheme in Milan, Italy.