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

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  • Terry Barker

Abstract

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.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Economic Systems Research.

Volume (Year): 11 (1999)
Issue (Month): 4 ()
Pages: 401-422

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Handle: RePEc:taf:ecsysr:v:11:y:1999:i:4:p:401-422

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Keywords: Large-scale energy-environment-economy modelling; carbon tax; European Union; multilateral coordinated tax policy;

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Cited by:
  1. Babiker, Mustafa H. & Metcalf, Gilbert E. & Reilly, John, 2003. "Tax distortions and global climate policy," Journal of Environmental Economics and Management, Elsevier, vol. 46(2), pages 269-287, September.
  2. Annegrete Bruvoll & Taran F�hn & Birger Str¯m, 2003. "Quantifying Central Hypotheses on Environmental Kuznets Curves for a Rich Economy: A Computable General Equilibrium Study," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(2), pages 149-173, 05.
  3. Barker, Terry & Junankar, Sudhir & Pollitt, Hector & Summerton, Philip, 2007. "Carbon leakage from unilateral Environmental Tax Reforms in Europe, 1995-2005," Energy Policy, Elsevier, vol. 35(12), pages 6281-6292, December.
  4. Dagoumas, [alpha].S. & Barker, T.S., 2010. "Pathways to a low-carbon economy for the UK with the macro-econometric E3MG model," Energy Policy, Elsevier, vol. 38(6), pages 3067-3077, June.
  5. Bruvoll, Annegrete & Faehn, Taran, 2006. "Transboundary effects of environmental policy: Markets and emission leakages," Ecological Economics, Elsevier, vol. 59(4), pages 499-510, October.
  6. Liu, Xuemei, 2008. "The monetary compensation mechanism: An alternative to the clean development mechanism," Ecological Economics, Elsevier, vol. 66(2-3), pages 289-297, June.

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