Advanced Search
MyIDEAS: Login

The effect of fossil energy and other environmental taxes on profit incentives for change in an open economy: Evidence from the UK

Contents:

Author Info

  • Webster, Allan
  • Ayatakshi, Sukanya
Registered author(s):

    Abstract

    This paper argues that the underlying supply and demand analysis of fossil energy and other environmental taxes needs further elaboration when a country (a) introduces national fossil energy or environmental taxes and (b) is open to international trade at given world prices. We provide evidence that such conditions are plausible for many sectors in the UK. A key implication is that the short run effects of such taxes should not be felt in final good prices, since these are determined in world markets, but in terms of underlying profitability. These changes in underlying profits provide two key incentives for producers—to change to more environmentally friendly production techniques and to switch resources to production of less environmentally harmful goods. Using input—output techniques we provide evidence for the UK to show how existing fossil energy and other “green” taxes have affected underlying profitability. The evidence shows quite strong profit incentives to shift resources from a small number of energy intensive industries to others.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.sciencedirect.com/science/article/pii/S0301421513003480
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Elsevier in its journal Energy Policy.

    Volume (Year): 61 (2013)
    Issue (Month): C ()
    Pages: 1422-1431

    as in new window
    Handle: RePEc:eee:enepol:v:61:y:2013:i:c:p:1422-1431

    Contact details of provider:
    Web page: http://www.elsevier.com/locate/enpol

    Related research

    Keywords: Energy; Taxes; Profits;

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Kim, Young-Duk & Han, Hyun-Ok & Moon, Young-Seok, 2011. "The empirical effects of a gasoline tax on CO2 emissions reductions from transportation sector in Korea," Energy Policy, Elsevier, vol. 39(2), pages 981-989, February.
    2. Devereux, Michael P & Griffith, Rachel, 2002. "Evaluating Tax Policy for Location Decisions," CEPR Discussion Papers 3247, C.E.P.R. Discussion Papers.
    3. Sancho, Ferran, 2010. "Double dividend effectiveness of energy tax policies and the elasticity of substitution: A CGE appraisal," Energy Policy, Elsevier, vol. 38(6), pages 2927-2933, June.
    4. Fernandes, Ana M., 2007. "Trade policy, trade volumes and plant-level productivity in Colombian manufacturing industries," Journal of International Economics, Elsevier, vol. 71(1), pages 52-71, March.
    5. Peretto, Pietro F., 2009. "Energy taxes and endogenous technological change," Journal of Environmental Economics and Management, Elsevier, vol. 57(3), pages 269-283, May.
    6. Ekins, Paul & Pollitt, Hector & Summerton, Philip & Chewpreecha, Unnada, 2012. "Increasing carbon and material productivity through environmental tax reform," Energy Policy, Elsevier, vol. 42(C), pages 365-376.
    7. Baksi, Soham & Green, Chris, 2007. "Calculating economy-wide energy intensity decline rate: The role of sectoral output and energy shares," Energy Policy, Elsevier, vol. 35(12), pages 6457-6466, December.
    8. Antonia Cornwell & John Creedy, 1996. "Carbon taxation, prices and inequality in Australia," Fiscal Studies, Institute for Fiscal Studies, vol. 17(3), pages 21-38, August.
    9. Bassi, Andrea M. & Yudken, Joel S. & Ruth, Matthias, 2009. "Climate policy impacts on the competitiveness of energy-intensive manufacturing sectors," Energy Policy, Elsevier, vol. 37(8), pages 3052-3060, August.
    10. Sterner, Thomas, 2007. "Fuel taxes: An important instrument for climate policy," Energy Policy, Elsevier, vol. 35(6), pages 3194-3202, June.
    11. Hennessy, Hugh & Tol, Richard S. J., 2010. "The Impact of Tax Reform on New Car Purchases in Ireland," Papers WP349, Economic and Social Research Institute (ESRI).
    12. Paul Krugman, 1995. "Technology, Trade, and Factor Prices," NBER Working Papers 5355, National Bureau of Economic Research, Inc.
    13. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
    14. Paul Ekins & Philip Summerton & Chris Thoung & Daniel Lee, 2011. "A Major Environmental Tax Reform for the UK: Results for the Economy, Employment and the Environment," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 50(3), pages 447-474, November.
    15. Marion, Justin & Muehlegger, Erich, 2011. "Fuel tax incidence and supply conditions," Journal of Public Economics, Elsevier, vol. 95(9-10), pages 1202-1212, October.
    16. Sterner, Thomas, 2012. "Distributional effects of taxing transport fuel," Energy Policy, Elsevier, vol. 41(C), pages 75-83.
    17. Roberto Patuelli & Eric Pels & Peter Nijkamp, 2002. "Environmental Tax Reform and Double Dividend," Tinbergen Institute Discussion Papers 02-095/3, Tinbergen Institute.
    18. Michael E. Porter & Claas van der Linde, 1995. "Toward a New Conception of the Environment-Competitiveness Relationship," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 97-118, Fall.
    19. Llop, Maria, 2007. "Economic structure and pollution intensity within the environmental input-output framework," Energy Policy, Elsevier, vol. 35(6), pages 3410-3417, June.
    20. Ghalwash, Tarek, 2007. "Energy taxes as a signaling device: An empirical analysis of consumer preferences," Energy Policy, Elsevier, vol. 35(1), pages 29-38, January.
    21. Markandya, Anil & Pemberton, Malcolm, 2010. "Energy security, energy modelling and uncertainty," Energy Policy, Elsevier, vol. 38(4), pages 1609-1613, April.
    22. Llop, Maria & Pié, Laia, 2008. "Input-output analysis of alternative policies implemented on the energy activities: An application for Catalonia," Energy Policy, Elsevier, vol. 36(5), pages 1642-1648, May.
    23. Agnolucci, Paolo, 2009. "The effect of the German and British environmental taxation reforms: A simple assessment," Energy Policy, Elsevier, vol. 37(8), pages 3043-3051, August.
    24. Ekins, Paul & Kleinman, Harold & Bell, Sarah & Venn, Andrew, 2010. "Two unannounced environmental tax reforms in the UK: The fuel duty escalator and income tax in the 1990s," Ecological Economics, Elsevier, vol. 69(7), pages 1561-1568, May.
    25. Cremer, Helmuth & Gahvari, Firouz & Ladoux, Norbert, 2010. "Environmental tax design with endogenous earning abilities (with applications to France)," Journal of Environmental Economics and Management, Elsevier, vol. 59(1), pages 82-93, January.
    26. Stephen Guisinger, 1989. "Total Protection: A New Measure of the Impact of Government Interventions on Investment Profitability," Journal of International Business Studies, Palgrave Macmillan, vol. 20(2), pages 280-295, June.
    27. Lancaster, Kelvin, 1975. "Socially Optimal Product Differentiation," American Economic Review, American Economic Association, vol. 65(4), pages 567-85, September.
    28. Datta, Ashokankur, 2010. "The incidence of fuel taxation in India," Energy Economics, Elsevier, vol. 32(Supplemen), pages S26-S33, September.
    29. Wang, Xin & Li, Ji Feng & Zhang, Ya Xiong, 2011. "An analysis on the short-term sectoral competitiveness impact of carbon tax in China," Energy Policy, Elsevier, vol. 39(7), pages 4144-4152, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:61:y:2013:i:c:p:1422-1431. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.