Pigouvian Taxation Versus Cap-and-Trade Mechanisms in Environmental Liability Regimes: A Comparative Doctrinal and Economic Efficiency Analysis Under Transboundary Pollution Frameworks

Abstract

This article examines the doctrinal and economic efficiency trade-offs between Pigouvian corrective taxation and cap-and-trade permit allocation systems as instruments of environmental liability regulation within transboundary pollution frameworks. Drawing on comparative statutory analysis across the European Union Emissions Trading System, the United States Clean Air Act, and analogous legislative architectures in Southeast Asia, the study employs a dual-methodology approach combining Coasean welfare modeling with positive legal analysis. The findings reveal systematic divergences in deterrence efficacy, regulatory compliance costs, and distributional equity outcomes contingent upon jurisdictional enforcement capacity. The article concludes that hybrid liability architectures—integrating strict tortious liability thresholds with market-based permit instruments—yield superior allocative efficiency under conditions of asymmetric information and regulatory heterogeneity.