Rethinking Environmental Taxes: LAU Research Points to a Dual Approach
Environmental taxes have long been regarded as one of the most effective tools to reduce pollution. Designed to make polluters pay and encourage cleaner practices, these regulatory instruments have typically been aimed at producers, leaving consumers largely outside their scope.
According to the study Emissions Taxes and Market Power: Linked vs. Unlinked Market Failures by Dr. Walid Marrouch, professor of economics and associate dean of the Graduate Studies and Research Office at LAU, this imbalance has created a serious blind spot in policymaking.
“In many industries, from the agri-food sector to cryptocurrency mining and the weapons industry, pollution is caused not just by production but also by consumption,” Dr. Marrouch explained. “Our theoretical work shows that ignoring the consumer side leads to policies that look strong on paper but fail in practice.”
To address this gap, the study proposes a dual approach that targets both producers and consumers with two distinct ‘corrective’ taxes—far from being a call for heavier taxation, Dr. Marrouch stressed that the framework is about a more innovative and fairer distribution of responsibility.
“The objective is not to punish,” he said. “It is to design policies that reflect how pollution actually occurs in markets. By regulating both sides, governments can avoid blind spots and create reforms that deliver measurable results in internalizing negative externalities.”
The research also highlights the practical relevance of such a framework for countries like Lebanon, where waste management, energy use and food systems pose urgent challenges. Dr. Marrouch noted that the dual-tax system offers “a potential pathway for tackling these issues more effectively, while ensuring that both producers and consumers share responsibility for their polluting behavior.”
Ultimately, the study recommends a shift in how policymakers approach environmental taxes. As Dr. Marrouch puts it, “Economic models are valuable because they clarify trade-offs and expose inefficiencies, but they must ultimately serve decision-making. The goal is to make informed choices that balance promoting functioning markets, equity and sustainability. That requires policies built on evidence and shaped through public debate.”
By advancing this work, LAU continues to reinforce its mission to generate research that is both rigorous and socially relevant, thereby helping to bridge the gap between theory and the pressing realities of public policy and the need for reform.