To clarify: A Pigovian tax on pollutants is a tax equal to the dollar magnitude of the damage caused by the last unit of the pollutant emitted. The problem in market economies is that there is no reliable way to estimate how high or low this Pigovian tax should be. It is possible to do studies to try to estimate the damage caused by pollutants – indeed a majority of people who are professional environmental economists spend their time trying to do just that. But all of the methods for doing this are notoriously unreliable and subject to challenge.
So… the idea was to incorporate what economists call a “mechanism” within the annual participatory planning procedure that would generate reasonably accurate estimates of the damages caused by different pollutants. When explaining what our “Pollution Demand Revealing Mechanism” PDRM accomplishes to an economist, the easy way to explain it is that ONCE THIS PDRM IS INCORPORATED INTO THE ANNUAL PARTICIPATORY PLANNING MECHANISM, THE ANNUAL PLANNING PROCEDURE WILL GENERATE REASONABLY ACCURATE ESTIMATES OF HOW HIGH, OR LOW, THE PIGOVIAN TAX SHOULD BE… something that market systems are ill-suited to do.
A crucial part of creating the PDRM is to create “Communities of Affected Parties,” or CAPs, which are comprised of all those who are physically damaged by a particular pollutant. When CAPs participate along with worker and consumer councils during annual participatory planning by announcing how much of the pollutant that adversely affects them they are willing to allow to be emitted, we have proved there are three important results: (1) the efficient amount of pollutants will be emitted… neither more nor less. (2) Worker councils emitting pollutants will be charged for the damage those pollutants inflict on victims, and therefore will take that “cost” into account when deciding what and how to produce. And (3) those damaged by the emissions, i.e. the members of the CAPs, will be compensated for the damages they incur.
If I am talking with an economist the easiest way for me to explain what the PDRM in the annual participatory planning procedure DOES is that it generates reasonably accurate estimates of what the Pigovian taxes should be – i.e. it solves the previously unsolved problem with Pigovian taxes, how high or low they should be, by replacing unreliable studies. And as far as I know there is no other economic system… not market capitalism, not market socialism, not centrally planned socialism, not community based economics… which can claim to accomplish this increasingly important task.
There are two publications which explain all this in detail, and “prove” under what assumptions the PDRM will accomplish what I just explained:
Pages 138 - 149 in chapter 7 of Democratic Economic Planning (Routledge, 2021).
“Wanted: A Pollution Damage Revealing Mechanism,” *Review of Radical Political Economics (49, 2), 2017: 233-246.