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Double dividend effectiveness of energy tax policies and the elasticity of substitution: A CGE appraisal

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  • Sancho, Ferran

Abstract

There is a considerable body of literature that has studied whether or not an adequately designed tax swap, whereby an ecotax is levied and some other tax is reduced while keeping government income constant, may achieve a so-called double dividend, that is, an increase in environmental quality and an increase in overall efficiency. Arguments in favor and against are abundant. Our position is that the issue should be empirically studied starting from an actual, non-optimal tax system structure and by way of checking the responsiveness of equilibria to revenue neutral tax regimes under alternate scenarios regarding technological substitution. With the use of a CGE model, we find that the most critical elasticity for achieving a double dividend is the substitution elasticity between labor and capital whereas the elasticity that would generate the highest reduction in carbon dioxide emissions is the substitution elasticity among energy goods.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Policy.

Volume (Year): 38 (2010)
Issue (Month): 6 (June)
Pages: 2927-2933

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Handle: RePEc:eee:enepol:v:38:y:2010:i:6:p:2927-2933

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

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Keywords: Applied general equilibrium Tax reform Double dividend;

References

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  1. Kehoe, Timothy J & Polo, Clemente & Sancho, Ferran, 1995. "An Evaluation of the Performance of an Applied General Equilibrium Model of the Spanish Economy," Economic Theory, Springer, vol. 6(1), pages 115-41, June.
  2. Antonio Manresa & Ferran Sancho, 2002. "Implementing a Double Dividend: Recycling Ecotaxes Towards Lower Labour Taxes," UFAE and IAE Working Papers 536.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  3. Cardenete, M. Alejandro & Sancho, Ferran, 2004. "Sensitivity of CGE Simulation Results to Competing SAM Updates," The Review of Regional Studies, Southern Regional Science Association, vol. 34(1), pages 37-56.
  4. Golan, Amos & Judge, George & Robinson, Sherman, 1994. "Recovering Information from Incomplete or Partial Multisectoral Economic Data," The Review of Economics and Statistics, MIT Press, vol. 76(3), pages 541-49, August.
  5. Oswald, Andrew J, 1982. "The Microeconomic Theory of the Trade Union," Economic Journal, Royal Economic Society, vol. 92(367), pages 576-95, September.
  6. Robert S. Chirinko, 2002. "Corporate Taxation, Capital Formation, and the Substitution Elasticity between Labor and Capital," CESifo Working Paper Series 707, CESifo Group Munich.
  7. Kehoe, Timothy J. & Whalley, John, 1985. "Uniqueness of equilibrium in large-scale numerical general equilibrium models," Journal of Public Economics, Elsevier, vol. 28(2), pages 247-254, November.
  8. Leung, H. M. & Low, L. & Toh, M. H., 1999. "Tax Reforms in Singapore," Journal of Policy Modeling, Elsevier, vol. 21(5), pages 607-617, September.
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Cited by:
  1. Geir H. Bjertnæs & Marina Tsygankova & Thomas Martinsen, 2012. "The double dividend in the presence of abatement technologies and local external effects," Discussion Papers 691, Research Department of Statistics Norway.
  2. Oral, Isil & Santos, Indhira & Zhang, Fan, 2012. "Climate change policies and employment in Eastern Europe and Central Asia," Policy Research Working Paper Series 6294, The World Bank.

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