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Gradual Green Tax Reforms

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Author Info

  • Carlos de Miguel

    ()

  • Baltasar Manzano

    ()
    (Rede (Universidade de Vigo) and Economics for Energy)

Abstract

Green tax reforms have become an important tool not only in protecting the environment but also in bringing about a more efficient tax system. However, reforms often imply accepting sacrifices in the short-run and bring about the risk of potential political opposition. Within this framework, the debate on whether to implement green tax reforms in one-step or gradually becomes of great interest. In this paper we use a calibrated dynamic general equilibrium model to evaluate different reforms that consist in increasing energy taxes and adjusting capital taxation in a revenue-neutral framework. Our findings show that, although an environmental dividend is always granted, the efficiency dividend depends on the type of reform, its size and how gradually it is implemented. Thus, one-step reforms that produce an efficiency dividend would imply large efficiency costs in the short-run. In this case, the reform could only produce efficiency gains in the short-run if it is implemented gradually, although such gains would end up disappearing in the long-run.

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File URL: http://www.eforenergy.org/docpublicaciones/documentos-de-trabajo/WP04-2011b.pdf
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Bibliographic Info

Paper provided by Economics for Energy in its series Working Papers with number 04-2011.

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Length: 22 pages
Date of creation: Sep 2011
Date of revision:
Handle: RePEc:efe:wpaper:04-2011

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Web page: http://www.eforenergy.org

Related research

Keywords: Green Tax Reform; General Equilibrium;

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References

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  1. Goulder, Lawrence H. & Parry, Ian W. H. & Williams III, Roberton C. & Burtraw, Dallas, 1999. "The cost-effectiveness of alternative instruments for environmental protection in a second-best setting," Journal of Public Economics, Elsevier, vol. 72(3), pages 329-360, June.
  2. de Miguel, Carlos & Manzano, Baltasar, 2011. "Green tax reforms and habits," Resource and Energy Economics, Elsevier, vol. 33(1), pages 231-246, January.
  3. Michael Mussa, 1984. "The Adjustment Process and the Timing of Trade Liberalization," NBER Working Papers 1458, National Bureau of Economic Research, Inc.
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Cited by:
  1. Shkarlet, Serhiy & Petrakov, Iaroslav, 2013. "Environmental Taxation Evolution in Ukraine: Trends, Challenges and Outlook," MPRA Paper 45168, University Library of Munich, Germany, revised 18 May 2013.
  2. Markandya, Anil & González-Eguino, Mikel & Escapa, Marta, 2013. "From shadow to green: Linking environmental fiscal reforms and the informal economy," Energy Economics, Elsevier, vol. 40(S1), pages S108-S118.
  3. Baltasar Manzano & Luis Rey, 2012. "The Welfare Cost of Energy Insecurity," Working Papers fa07-2012, Economics for Energy.

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