What is the potential impact of a taxation system reform on carbon abatement and industrial growth in China?

Economists have long argued that market-based environmental policy such as an environmental tax is beneficial to abate pollution emissions. This study aims at investigating the impact of carbon tax levy on carbon dioxide (CO₂) abatement and industrial growth in China. To this end, the marginal abatement cost (MAC) of industrial CO₂ emissions is estimated as the benchmark of setting the carbon tax rate by using the directional distance function (DDF). This paper employs the polynomial dynamic panel model to forecast the impact of carbon tax levy on target variables such as sectoral value-added and CO₂ intensity. The results reveal that the levy of a CO₂ tax has a negative impact on industrial output only in the short term. In the long term, the impact of CO₂ tax levy on output will become positive. The levy of a CO₂ tax is always beneficial to reduce CO₂ intensity. Corresponding policy suggestions for an environmental taxation system reform are given in the concluding section.     

NO x Emissions and the Use of Advanced Pollution Abatement Techniques in West Germany

This paper concentrates on the integration of pollution abatement techniques for NO x emissions into the environmentally enlarged input-output model PANTA RHEI II for West Germany. The use of available abatement technologies is explained by emission prices, investment and technological factors for different sectors and energy carriers. Simulation runs to the year 2005 show the economic, environmental and technological effects of a tax on NO x emissions, when revenues are recycled via reductions of employers' social security contributions. A cut of emissions by almost one third against the businessas-usual level is reached. In particular, the use of advanced pollution abatement techniques and structural changes prevent negative economic effects on the macro level. Lower real wages even induce higher employment.     

Environmental policy implications of extreme variations in pollutant stock levels and socioeconomic costs

This paper uses a real options approach to examine the impact of abrupt increases in carbon dioxide emissions and pollutant-related socio-economic costs. It derives optimal investment rules in the form of critical values for both pollutant stock levels and social costs, above which environmental policies should be adopted. Moreover, it determines the optimal emissions abatement level. Our analysis extends the methodology of Pindyck (2000) using jump diffusion processes. We show that if the stock of pollutant is subject to extreme variations and the emissions abatement level is chosen exogenously by the policymaker, then lower levels of the pollutant stock are required to trigger policy adoption. A similar, yet more prominent, effect is observed under the assumption that pollutant-related socio-economic costs and benefits are expected to exhibit abrupt changes. However, different results are obtained when we examine simultaneously the two interrelated decisions, namely, the optimal threshold of emissions abatement and the optimal abatement level. In this case, an increase in the size and/or probability of a jump increases the critical values of both pollutant stock levels and socio-economic costs but leads to higher optimal abatement.     

Neutral carbon tax and environmental targets in Brazil

We evaluate the effects of a carbon tax in the Brazilian economy using an input–output framework. First, we consider the impacts of a carbon tax of US$ 10 and US$ 50/metric ton of CO₂ equivalent. As usual, the adoption of the carbon tax generates adverse effects on GDP, wages and jobs in the short term, but reduces emissions and generates new government revenues, especially in the case of the greater tax. Second, we consider a broader tax system reform. In this reform, we replace distortionary taxes by a tax on value added. To compensate for the loss of government revenue, we assume a carbon tax with equivalent revenue. We find that the net effect is a GDP increase of 0.47%, the creation of 533 thousand jobs and reduction of 1.6 million tons of CO₂ emissions. Both scenarios exempt exports and levy imports to correct adverse effects on the country’s competitiveness.     

Estimating the effect of a gasoline tax on carbon emissions

Recently the proposal has been made to raise gasoline taxes in the United States to curb carbon emissions. The existing literature on the sensitivity of gasoline consumption to changes in price may not be appropriate for evaluating the effectiveness of such a tax. First, most of these studies fail to address the endogeneity of gasoline prices. Second, the responsiveness of gasoline consumption to a change in tax may differ from the responsiveness of consumption to an average change in price. We address these challenges using a variety of methods including traditional single‐equation regression models, estimated by least squares or instrumental variables methods, and structural vector autoregressions. Our preferred approach exploits the historical variation in US federal and state gasoline taxes. Our most credible estimates imply that a 10‐cent per gallon increase in the gasoline tax would reduce carbon emissions from vehicles in the United States by about 1.5%. Copyright © 2010 John Wiley & Sons, Ltd.     

Using input–output models to estimate sectoral effects of carbon tax policy: Applications of the NGFS scenarios

The Network of Central Banks and Supervisors for Greening the Financial System (NGFS) has engaged in scenario analysis that estimates a $200/ton carbon tax would be required to transition to net zero carbon by 2050. Using a $200/ton carbon tax as a base, this paper uses input–output (IO) modeling to generate price and revenue effects of a carbon tax. Results from these models, which can only be interpreted as the short-run, upper-bound effects of the carbon tax policy, imply that in response to a $200/ton tax on CO₂e emissions, carbon-intensive industries, such as agriculture, extraction, transportation, utilities, and chemicals, may experience price increases in the range of 10-30 percent. Other industries will also experience price increases, but to a lesser degree, due to increased input costs associated with the tax. In addition, modeling results also suggest that industries facing elastic pricing regimes may face similar-sized declines in revenues as a consequence of the carbon tax. Rank-ordered impact results from these models can be utilized by bank supervisors and firms to adequately plan for sectoral-level transition risk within their lending and/or investment portfolios.     

Abatement R&D,market imperfections,and environmental policy in an endogenous growth model

We develop an endogenous growth model featuring environmental externalities, abatement R&D, and market imperfections. We compare the economic performances under three distinct regimes that encompass public abatement, private abatement without tax recycling, and private abatement with tax recycling. It is found that the benefit arising from private abatement will be larger if the degree of the firms’ monopoly power is greater. With a reasonably high degree of monopoly power, a mixed abatement policy by which the government recycles environmental tax revenues to subsidize the private abatement R&D is a plausible way of reaching the highest growth rate and welfare.     

Will Rio stick: Barriers to global cooperation on CO2 abatement?

The Rio Earth Summit resulted in commitments to reduce CO₂ emissions from all industrialized countries, but there are many banners to overcome before its full objectives can be met. One major obstacle is carbon leakage, the increase in developing country emissions predicted as a result of OECD policies for abatement. Causes of carbon leakage are discussed here and its magnitude assessed. The effect is found to be relatively small - nevertheless, in the long run policies that provide incentives for CO₂ abatement globally will become imperative.     

TAX REVENUE-FINANCED PUBLIC ABATEMENT AND WELFARE: A CONSUMPTION TAX CASE

This paper develops a model of public abatement financed either by a pollution tax or by a consumption tax. It shows that consumption tax revenue-financed public abatement raises welfare more than pollution tax revenue-financed public abatement does when the pollution tax rate rises. This result is worthwhile for environmental protection policy makers when they are determining the revenue source of public abatement.     

基于二阶段博弈的碳排放权分配机制研究

建立了政府和两企业之间的一主两从Stackelberg博弈模型和企业之间的差异Bertrand价格博弈模型,将两者结合成一个二阶段博弈模型。对政府和企业之间的博弈行为以及决策变量之间的关系进行分析。研究证明碳排放交易市场可以通过每个企业的边际减排成本均等化实现排放权最终的优化配置,而政府通过确定碳排放权的初始分配比例实现社会的公平性。最后通过数据分析了环境污染程度、企业的减排技术对在均衡条件下的企业效益、政府决策偏好和社会公平性的影响。     

Carbon taxes and the double dividend hypothesis in a recursive-dynamic CGE model for Spain

A carbon tax is potentially a policy that can reduce CO₂ emissions and mitigate climate risks, at lowest economy-wide costs. We develop a dynamic CGE model for Spain to assess the economic and environmental effects of a carbon tax, and test the double dividend (DD) hypothesis. We simulate the impact of three carbon taxes: €10, €20 and €30 per ton of CO₂. For each tax, four ‘revenue recycling’ scenarios are examined: a reduction of taxes on capital, on labor, on value-added tax, and a scenario in which revenues are not recycled. We find a DD for taxes of €10/ton and lower, within five to seven years of implementation. We estimate an annual CO₂ emissions reduction of around 10% with this tax. Under some circumstances, the DD can be achieved for a tax of €20/ton. In any case, recycling revenues to cut pre-existing taxes reduces costs of imposing carbon taxes.     

TRADE LIBERALIZATION, PUBLIC ABATEMENT, AND WELFARE

This paper discusses public abatement financed by pollution tax revenue or tariff revenue and investigates the welfare consequences of a tariff. The main result of this paper is that under certain conditions a tariff reduction results in an improvement in welfare through an increase in public abatement and a decrease in pollution. This result may guide policy for countries that wish to harmonize trade liberalization and the environmental protection demonstrated by both the private and the public sectors.     

Dynamic decision and coordination in a low-carbon supply chain considering the retailer's social preference

We establish dynamic game models in a low-carbon supply chain consisting of a single manufacturer and a single retailer with social preference. This study investigates the complex dynamic characteristics of pricing decision and carbon abatement strategy in the supply chain and focuses on the impact of the retailer's social preference on pricing decision, carbon emission abatement strategy, profits, supply chain coordination, and complexity of dynamic models. We find that adjustment parameters of pricing and carbon emission abatement should be maintained in a certain range; otherwise, the system will be unstable and even chaotic through period double bifurcation or wave shape chaos. A higher social preference of the retailer is always beneficial to carbon abatement and the manufacturer and helps maintain the stability of the supply chain system. However, the impact on the long-term profitability of the supply chain is related to the state of the system. Compared with the setting of a centralized decision, the optimal carbon abatement strategy and supply chain profit in a decentralized decision are always less than those in a centralized setting, regardless of whether the retailer has social preference. Therefore, a side-payment self-executing contract is designed to coordinate the supply chain and achieve Pareto improvement. The coordination mechanism proposed in this study not only leads to Pareto improvement but also increases the stability of the supply chain system. Finally, this study enlightens management in operating a low-carbon supply chain.     

Emissions burden shifting in global value chains – winners and losers under multi-regional versus bilateral accounting

ABSTRACT

International trade leads to emissions burden shifting and threatens mitigation targets. Multiregional input–output (MRIO) and bilateral trade input–output (BTIO) models are widely used to analyse emissions embodied in trade and global value chains. Especially, the last one is used in analysing border tax adjustment (BTA) on the carbon content of imports. The model choice is not trivial. The analysis shows BTIO's inability to capture the consumer-principle throughout the production chain and its inadequacy as an option for consumption-based accounting, because it allocates emissions to the first importing country and to the sector of production, instead to the consumer (both country and region). Regarding the BTA assessment, BTIO tax domestic carbon content of direct imports, but not indirect imported carbon content. MRIO does provide incentives for mitigation in third countries. The differences in allocation of emissions and taxes’ burden of both models have different consequences for developed and undeveloped regions.     

On revenue recycling and the welfare effects of second-best congestion pricing in a monocentric city

This paper examines congestion taxes in a monocentric city with pre-existing labor taxation. When road toll revenue is used to finance labor tax cuts, 35% of the optimal road tax in our numerical model does not reflect marginal external congestion costs, but rather functions as a Ramsey–Mirrlees tax, i.e. an efficiency enhancing mechanism allowing for an indirect spatial differentiation of the labor tax. This adds a quite different motivation to road pricing, since welfare gains can be produced even in absence of congestion. We find that the optimal road tax is non-monotonic across space, reflecting the different impacts of labor supply elasticity and marginal utility of income, which both vary over space. The relative efficiencies of some archetype second-best pricing schemes (cordon toll, flat kilometer tax) are high (84% and 70% respectively). When road toll revenue is recycled lump-sum, the optimal toll lies below its Pigouvian level. Extensions in a bimodal framework show that the optimality of using road toll revenue to subsidize public transport depends on the initial inefficiency in public transport pricing.     

Resource balance, limited information and public policy

The U.S. Federal Government through its expenditure programs is having a major impact on all forms of pollution abatement. Total expenditures on Federal environmental programs amounted to $3.3 billion in 1972. A program of this magnitude can easily lead to waste and expenditures on conflicting goals unless carefully managed.

In a recent article in the Am. Econ. Rev. William Baumol examined the theoretical justification for and attacks on the Pigouvian tax and subsidy approach to controlling externalities. He concluded that while it is theoretically possible to control externalities through Pigou's procedure, the existence of multiple equilibrium and information requirements make it impractical. He proposes an alternate approach which changes the policy goal from maximization of social welfare to generation of acceptable levels of externalities. His goals differ drastically from those of the resource balance model presented by Kneese, Ayres and D'Arge of maximization of social welfare. This paper will combine the concept of resource balance with the goal of obtaining acceptable level of externalities at minimum cost in the presentation of a theoretical model that can be operationalized.

This paper proposes a general equilibrium method, utilizing the decomposition principle of linear programming, that will permit expenditures and regulations only on non-conflicting goals and includes a feedback mechanism for determining if a program is wasteful in relation to other programs. The model has five advantages over earlier proposals: (1) it is a general equilibrium rather than partial equilibrium model; (2) it is dynamic rather than static; (3) limited information rather than complete information is required for its implementation; (4) the model is heuristic rather than optimizing in the sense that policy decisions always increase the efficiency of pollution control, but because of the existence of uncertainty, they cannot be interpreted as maximizing social welfare; (5) the model incorporates multiple rather than a single policy tool.     

THE ECONOMICS OF THE GREENHOUSE EFFECT

Abstract. The recognition that economic activity is contributing to climatic change, with attendant costs that may be of large magnitudes, has set in motion a substantial research effort. This paper seeks to review the contribution of economics to analysis of the greenhouse effect and to the policies and instruments suggested as means of mitgiating its damage.
A brief overview of the causes and consequences of global warming is given, and a number of energy-economy forecasting models are examined. As the costs of global warming depend upon the extent to which preventative and adaptive measures are undertaken, the techniques available to evaluate these costs are surveyed.
We examine extant targets for greenhouse gas emissions reduction, and explore the frameworks within which optimal policy targets can be designed. The paper also considers the narrower question of (minimized) abatement costs, and surveys the types of models used to estimate them.
The merits of alternative policy instruments are examined, paying particular attention to the role that risk and uncertainty, and the costs of monitoring and implementation of policy under conditions of imperfect information, may play in the choice of instruments. Problems of international co-operation in the development of abatement policy are examined, and we consider the compensations (across both nations and generations) that are likely to be necessary conditions for effective action.     

Business and the genesis of the European Community carbon tax proposal

The purpose of this paper is to examine the role of business in the regulatory process associated with the carbon tax proposal. The first part of the paper describes the Community's climate change policy, noting first the essential features of Community environment policy-making, the role of consultation with industry and the significance of the ‘subsidiarity’ principle. This part of the paper moves on to examine the carbon tax proposal and its evolution since 1990. The second part of the paper addresses the specific role which business played in influencing the development of the carbon tax proposal. The general strategy of business was to block the proposal entirely. The paper identifies the potential impacts of the tax on business, implications for corporate strategies and the specific channels through which business influenced the tax proposal, by participating in public debates, through representations to different directorates of the European Commission or by making a case to national authorities. The final part of the paper attempts to draw some lessons about: the business position in relation to large scale environmental problems such as climate change; business responses to economic instruments such as the carbon/energy tax; and the wider relationship between public authorities and business in regulatory processes. The question of whether this relationship has entered a new phase or whether there is still ‘business as usual’ is addressed.     

Achieving a 10% Cut in Europe's Carbon Dioxide Emissions using Additional Excise Duties: Coordinated,Uncoordinated and Unilateral Action using the Econometric Model E3ME

Coordinated, uncoordinated and unilateral policies to reduce carbon dioxide emissions by 10% in 11 member states of the European Union (EU) by 2010 are compared with unilateral policies in each member state. The paper presents the results from four projections using a large-scale, integrated, regionalized E3 model of the EU (not a general equilibrium model) estimated on time series, cross-section data for 1968—93 with international trade treated as between each member state and a European transport and distribution network. The 10% reduction is achieved by additional excise duties incremented every year from 1999 to 2010, according to the carbon contents of fuels, with special treatment of electricity (taxed on outputs not inputs) and with revenues recycled via reductions in employers' social security contributions. Multilateral coordinated policies require a common tax rate of 156 Ecus per tonne carbon (1999 prices), which rises to an average of 162 Ecu/tonne, with a wide range between regions when policies are uncoordinated. All the tax shift projections show double dividends of emission reduction and employment gain for all member states. Unilateral policies do not show much carbon leakage and they show smaller gains for output and employment. The results are compared with those from a general equilibrium model (GEM-E3), tackling the same topic.     

税收政策如何促进低碳经济发展

随着经济的迅猛发展,工业化建设步伐仍然占据着重要地位,随之而来的就会遇到环境污染、资源枯竭等问题。其中大气中二氧化碳浓度升高带来的全球变暖已成为国际社会关注的焦点。低碳经济是一种可持续的发展模式,是能达到碳排放量、生态环境代价以及社会经济成本共赢的一种经济发展模式。文章在剖析我国发展低碳经济现有税制存在的问题的基础上,结合实际状况,提出解决问题办法,充分发挥税收政策对促进低碳经济发展的重要作用。