In Search of a Rationale for Differentiated Environmental Taxes
AbstractEnvironmental tax schemes in OECD countries often involve tax rates differentiated across industrial, commercial and household sectors. In this paper, we investigate four potentially important arguments for these deviations from uniform taxation: pre-existing tax distortions, domestic equity concerns, global environmental effectiveness, and strategic trade policy. Our primary objective is to ascertain whether the degree of tax differentiation observed in many countries can be rationalized on economic grounds. In simulations with a computable general equilibrium model, we calculate optimal policies under various settings. Our simulation results lead us to conclude that there is little economic rationale for the common policy practice of discriminating strongly in favor of heavy industries, even when accounting for interacting taxes, distributional concerns, leakage, and international market power.
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Bibliographic InfoPaper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2003 with number 26.
Date of creation: 04 Jun 2003
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optimal environmental taxation; computable geneal equilibrium;
Other versions of this item:
- Rutherford, Thomas F. & Böhringer, Christoph, 2002. "In Search of a Rationale for Differentiated Environmental Taxes," ZEW Discussion Papers 02-30, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
- R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-06-16 (All new papers)
- NEP-GEO-2003-06-16 (Economic Geography)
- NEP-PBE-2003-06-16 (Public Economics)
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