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Gradual green tax reforms

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  • de Miguel, Carlos
  • Manzano, Baltasar

Abstract

Green tax reforms have become an important tool not only in protecting the environment but also in bringing about a more efficient tax system. However, reforms often imply accepting sacrifices in the short-run and bring about the risk of potential political opposition. Within this framework, the debate on whether to implement green tax reforms in one-step or gradually becomes of great interest. In this paper, we use a dynamic general equilibrium model, calibrated to the Spanish economy, to evaluate different reforms that consist in increasing energy taxes and adjusting capital taxation in a revenue-neutral framework. Our findings show that, although an environmental dividend is always granted, the existence of an efficiency dividend depends on the type of reform, its size and how gradually it is implemented. Thus, one-step reforms that produce an efficiency dividend would imply large efficiency costs in the short-run. In this case, the reform could only produce efficiency gains in the short-run if it is implemented gradually, although such gains would end up disappearing in the long-run.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 33 (2011)
Issue (Month): S1 ()
Pages: S50-S58

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Handle: RePEc:eee:eneeco:v:33:y:2011:i:s1:p:s50-s58

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Web page: http://www.elsevier.com/locate/eneco

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Keywords: Green tax reform; General equilibrium;

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References

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  1. Lawrence H. Goulder & Ian W. H. Parry & Roberton C. Williams III & Dallas Burtraw, 1998. "The Cost-Effectiveness of Alternative Instruments for Environmental Protection in a Second-Best Setting," NBER Working Papers 6464, National Bureau of Economic Research, Inc.
  2. Michael Mussa, 1984. "The Adjustment Process and the Timing of Trade Liberalization," NBER Working Papers 1458, National Bureau of Economic Research, Inc.
  3. de Miguel, Carlos & Manzano, Baltasar, 2011. "Green tax reforms and habits," Resource and Energy Economics, Elsevier, vol. 33(1), pages 231-246, January.
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Cited by:
  1. Mikel González-Eguino & Anil Markandya & Marta Escapa, 2012. "From Shadow to Green: Linking Environmental Fiscal Reforms and the Informal Economy," Working Papers 2012-03, BC3.
  2. Shkarlet, Serhiy & Petrakov, Iaroslav, 2013. "Environmental Taxation Evolution in Ukraine: Trends, Challenges and Outlook," MPRA Paper 45168, University Library of Munich, Germany, revised 18 May 2013.
  3. Baltasar Manzano & Luis Rey, 2012. "The Welfare Cost of Energy Insecurity," Working Papers fa07-2012, Economics for Energy.

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