Will there be a targeting of tax instruments with output taxes used for financing public goods and tax competition and emission taxes solely for combating emissions?
However, as a rule, this literature does not distinguish between emission and output taxes, ignores the question of the public good provision, and is cast in terms of competition between imperfectly competitive firms.
9) The intuition for this result must be seen in the availability of output taxes for tax competition.
The main import of Propositions 2 and 3 is that economic integration leads to competition in output taxes.
Then, economic integration leads to a lowering of output taxes, lower polluting good prices, an increase in emission taxes, adoption of less (or same) polluting technologies, increased aggregate emissions, and lower overall welfare levels.
Alternatively, the countries may harmonize their emission taxes and then determine output taxes independently.
The article has shown that competitive concerns change the structure of output taxes but not that of emission taxes.
Goulder, "The Choice between Emission Taxes and Output Taxes
under Imperfect Monitoring, " Journal of Environmental Economics and Management, 32(1997), pp.
Koenig  also assumes that regulators use both specific and ad valorem output taxes
when examining a related question -- the benefits (under uncertainty) of allowing regulators to impose output taxes
along with a direct effluent tax.