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Designing an electricity tax system in presence of international regulations and multiple public goals: An empirical assessment

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  • Bjertnæs, Geir H.
  • Fæhn, Taran
  • Aasness, Jørgen
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    Abstract

    The European competition rules restrict governments' opportunity to differentiate terms of energy accessibility among firms and industries. This easily runs counter with regional and industrial goals of national energy policies. Norway levies a tax on use of electricity, but exempts main industrial usages. This analysis assesses alternative, internationally legal, designs of the system in terms of their effects on efficiency and distribution, including industrial objectives. Among the reforms we explore, removing the exemptions would be the most effective way of raising revenue, but it would be politically costly by deteriorating the competitiveness of today's favoured industries. An entire abolishment of the electricity tax, and replacing revenue by increased VAT, would generate a more equal distribution of standard of living and, at the same time, avoid the trade-off between efficiency and competitiveness.

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    Bibliographic Info

    Article provided by Elsevier in its journal Energy Policy.

    Volume (Year): 36 (2008)
    Issue (Month): 10 (October)
    Pages: 3723-3733

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    Handle: RePEc:eee:enepol:v:36:y:2008:i:10:p:3723-3733

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

    Related research

    Keywords: Tax reform Multiple policy goals Computable general equilibrium model;

    References

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    1. Lawrence H. Goulder & Roberton C. Williams III, 2003. "The Substantial Bias from Ignoring General Equilibrium Effects in Estimating Excess Burden, and a Practical Solution," Journal of Political Economy, University of Chicago Press, vol. 111(4), pages 898-927, August.
    2. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production: I--Production Efficiency," American Economic Review, American Economic Association, vol. 61(1), pages 8-27, March.
    3. Sheshinski, Eytan & Green, Jerry, 1976. "Direct Versus Indirect Remedies for Externalities," Scholarly Articles 3204666, Harvard University Department of Economics.
    4. Klette, Tor Jakob, 1999. "Market Power, Scale Economies and Productivity: Estimates from a Panel of Establishment Data," Journal of Industrial Economics, Wiley Blackwell, vol. 47(4), pages 451-76, December.
    5. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    6. Bowitz, Einar & Cappelen, Adne, 2001. "Modeling income policies: some Norwegian experiences 1973-1993," Economic Modelling, Elsevier, vol. 18(3), pages 349-379, August.
    7. Bjertnæs, Geir H. & Fæhn, Taran, 2008. "Energy taxation in a small, open economy: Social efficiency gains versus industrial concerns," Energy Economics, Elsevier, vol. 30(4), pages 2050-2071, July.
    8. Brita Bye & Karine Nyborg, 2003. "Are Differentiated Carbon Taxes Inefficient? A General Equilibrium Analysis," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 95-112.
    9. Myles,Gareth D., 1995. "Public Economics," Cambridge Books, Cambridge University Press, number 9780521497695, April.
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