Environmental Taxation and Structural Change in an Open Economy (original) (raw)
Related papers
German Economic Review, 2008
Studies of structural change induced by environmental taxation usually proceed in a perfect-competition framework and typically find structural change to be quite moderate under realistic emission reduction scenarios. By observing that some of the industries affected are likely to operate under imperfect rather than perfect competition, additional mechanisms emerge which may amplify structural change beyond the extent identified as yet. Especially, changes in economies of scale may arise which weaken or strengthen the competitive position of industries over and above the initial cost effect. Using a computable general equilibrium model for Germany to examine the effects of a unilaterally introduced carbon tax, we find that induced structural change is more pronounced under imperfect competition than under perfect competition. At the macroeconomic level, we find that aggregate losses in economies of scale are larger than aggregate gains, implying that the total costs of environmental regulation are higher under imperfect competition than under perfect competition.
Sustainable Energy Technologies and Assessments, 2020
Limitations and environmental effects of fossil fuels have encouraged decision-makers to create and implement different energy policies, in which carbon tax is one of the most important financial policies. Governments are considering the implementation of the carbon tax to achieve lower greenhouse gas emission, higher national incomes and tax systems, deployments of renewable energy sources, and increasing the efficiency of the energy systems. Therefore, understanding the effects and consequences of the carbon tax policy on different economic, social welfare, and industries is imperative due to its impact on the costs of productions, inflation, and competitiveness of the industries. This research is to evaluate the impact of the carbon tax on the structure of the Finland industry as one of the high energy-intensive consumption countries. We use a computable general equilibrium model to create a connection between the effects of the carbon tax and economic indicators, production, and consumption sector. In this research, the effect of the carbon tax on the macroeconomic and industry sector is studied. The results of this research indicate that the application of carbon tax policies leads to adverse effects on gross domestic production (GDP). By studying the fluctuations of the trade balance, export and import level, production price, and energy consumption level in the industry sector, considerable results have been achieved. For instance, considering the specific coverage of industries in Finland, they have higher competitiveness in general.
Carbon leakage from unilateral Environmental Tax Reforms in Europe, 1995–2005
Energy Policy, 2007
Studies of the effects of the Kyoto Protocol have shown carbon leakage (typically from tax and permit schemes with lump-sum revenues recycling) to be in the range of 5-20% using static Computable General Equilibrium models. However, in practice, researchers have found that carbon leakage from the implementation of the EU ETS is unlikely to be substantial because transport costs, local market conditions, product variety and incomplete information all tend to favour local production. This study investigates potential carbon leakage from six EU Member States (MSs) that implemented Environmental Tax Reform (ETRs) unilaterally over the period 1995-2005. The study uses the large-scale multisectoral integrated energy-environment-economy (E3) model of 27 European countries, energy-environment-economy model of Europe (E3ME), to undertake a dynamic comparative analysis to assess any carbon leakage effects over the longer term 1995-2012. A counterfactual Reference case is constructed, assuming that the six countries did not introduce ETRs; then alternative scenarios are developed to assess the effects of the ETRs, including effects on CO 2 emissions for the EU25 economies. Most MSs recorded a reduction in CO 2 emissions when comparing the Baseline case to the Reference case. The results show that carbon leakage is very small and in some cases negative, due to technological spillover effects.
Environmental Taxation in Open Economies: Unilateralism or Partial Harmonization
Southern Economic Journal, 2005
This paper studies whether, in the presence of a global negative externality, economic integration will necessarily lower environmental quality and the provision of public goods. It shows that it is possible for the tax competition to help environment in that it may induce¯rms to adopt less polluting technologies. This occurs because emission taxes may in fact increase as the economy opens up, despite the fact that the rule for setting emission taxes remain una®ected. Moreover, tax competition may also increase public goods provision although it leads to the introduction of a negative term in the rule that determines commodity taxes. The paper also examines the e±cacy of partial tax harmonization policies. It shows that harmonization of output taxes (above their unrestricted Nash equilibrium values) leads to the adoption of cleaner technologies and to improvements in the overall quality of the environment and welfare under some circumstances, and to dirtier technologies and reductions in the quality of the environment and welfare under other. On the other hand, harmonizing of emission taxes above their Nash equilibrium values appear to always lead to improvements in the environment and welfare via adoption of cleaner technologies.
Environmental Tax Reform in the European Union: Impact on CO2 Emissions and the Economy
Zeitschrift für Energiewirtschaft
Economic instruments in environmental policy try to correct prices in order to internalise externalities. The environmental tax reform is a specific policy approach, which raises taxation of ‘bads’ such as resource use or emissions and reduces other taxes on ‘goods’ such as labour that are felt as a burden so that the total tax revenue remains constant. On a small scale some European countries introduced this instrument, and the results have been evaluated broadly positive by the literature. The paper at hand gives answers to the question, what might happen to CO2 emissions and the economy, if this instrument would be used in all European countries in a scale that allows reaching the European CO2 emission targets. The instrument of the analysis is the global economy-energy-environment model GINFORS. The simulation results show that the targets can be met with only small losses in GDP and gains in employment. Ökonomische Instrumente der Umweltpolitik versuchen die Preise so zu korrig...
Is there a case for carbon-based border tax adjustment? An applied general equilibrium analysis
Applied Economics, 2013
Growing concern that unilateral greenhouse gas emission reductions could foster carbon leakage and undermine international competitiveness of domestic industry have led a number of EU and US politicians to advocate the use of border-tax adjustments (BTAs) to "level the playing field". Such proposals have so far often been dismissed on administrative feasibility and protectionist grounds, but surprisingly little economic analysis has been performed to assess their actual impacts on leakage, competitiveness and welfare. This paper uses the global recursive-dynamic general equilibrium model ENV-Linkages to fill this gap. Two alternative scenarios are considered under which either the EU alone or Annex-I countries as a whole cut their emissions by 20% by 2020 (and 50% by 2050) relative to 2005 levels. A broad range of checks are performed to assess the robustness of the main results to key model parameters, country coverage, targets and design features of BTAs. Two main conclusions stand out. First, BTAs are an effective way of reducing carbon leakage, if there is only a small coalition of acting countries, such as, just the EU, because leakage (while typically small) mainly occurs through the competitveness rather than through the fossil fuel price channel in this case. However, the need for, and the effectiveness of BTAs declines rapidly with the size of the coalition, as BTAs address a smaller share of an even smaller rate of leakage. Second, BTAs entail small welfare losses as a world level. Perhaps more strikingly, they do not necessarily curb the output losses incurred by the domestic energy intensive-industries (EIIs) they are intended to protect in the first place. This is in part because EIIs in the EU and the US make important use of carbon-intensive intermediate inputs produced by these same EIIs in other geographical areas. Another, deeper explanation is that EIIs are ultimately more adversely affected by carbon pricing itself than by any international competitiveness losses. JEL codes: Q54, H25, D58
General equilibrium models of environmental regulation and international trade
1999
The literature on the effects of environmental policy on intemational competitiveness consists mainly of partial equilibrium models. From a methodological point of view a general equilibrium approach is to be preferred. Only very few studies take a general equilibrium point of view but they do not reach clear~ut conclusions and do not to perforrn sensitivity analyses. ln the present paper we make a contribution to the general equilibrium approach and provide some interesting numerical examples, showing that partial equilibrium results do not generally hold in a general equilibrium setting. This has important implications for tax policies in the presence of environmental externalities.
Environmental Tax in a Green Market
Environmental and Resource Economics, 2010
We examine the impact of an emission tax in a green market characterized by consumers' environmental awareness and competition between firms for both environmental quality and product prices. The unique aspect of this model comes from the assumption that the cost for an increase in quality is fixed. We show that the emission tax improves welfare, thanks to a decline in pollution and despite an accentuation of product differentiation. The higher the marginal environmental damage is, the higher the optimal tax will be. The optimal tax, however, becomes lower than the marginal damage when the market is not too large. Finally, when marginal environmental damage is not too low, the optimal tax leads to a green product monopoly.