Pigouvian subsidy

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Definition

A Pigovian subsidy or Pigouvian subsidy is a subsidy provided to an activity on the grounds (i.e., with the explicit rationale) that the activity generates external benefits (i.e., positive externalities).

Pigouvian subsidies are closely related to Pigouvian taxes, and are typically provided by governmental or regulatory bodies. However, unlike Pigouvian taxes, Pigouvian subsidies could in principle be provided through private philanthropy.