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Outcomes of a Swedish Kilometre Tax. An analysis of Economic Effects and Effects on NOx Emissions

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  • Östblom, Göran

    ()
    (National Institute of Economic Research)

  • Hammar, Henrik

    (National Institute of Economic Research)

Abstract

By using an applied general equilibrium model of the Swedish economy, this paper examines how an in-troduction of a kilometre tax will affect economic growth (GDP), industry structure and emission levels of nitrogen oxides (NOx). According to our findings, the GDP will decrease by 0.1-0.3 per cent and NOx emissions by 0.4-0.8 per cent (assuming fixed emissions coefficients) during the 2006-2020 period. Thus, we find that economic growth and NOx emissions decouple due to an introduction of a kilometre tax. The projected reductions of NOx emissions are, however, minor relative to the Swedish objective for 2010. Road transports will overall be substituted by sea and rail transports and industry structure will change in favour of industries less dependent on heavy road transports. The emissions reductions will, however, be substantively larger if the kilometre tax also ends up inducing technological development able to expedite the adoption of cleaner vehicles. Consequently, this would reinforce the decoupling effect. Furthermore, we compare our findings with the results of others, who used partial equilibrium or bottom-up approaches to study the effects of a Swedish kilometre tax. The effects on production are more signifi-cant in the applied general equilibrium framework, but structural changes point in the same direction for all the studies compared.

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Bibliographic Info

Paper provided by National Institute of Economic Research in its series Working Paper with number 103.

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Length: 40 pages
Date of creation: 15 Dec 2007
Date of revision:
Handle: RePEc:hhs:nierwp:0103

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Keywords: static general equilibrium model; EMEC; partial equilibrium model; bottom-up models; kilometre tax; transport policy; environmental policy;

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  1. Dixon, Peter B. & Parmenter, B.R., 1996. "Computable general equilibrium modelling for policy analysis and forecasting," Handbook of Computational Economics, in: H. M. Amman & D. A. Kendrick & J. Rust (ed.), Handbook of Computational Economics, edition 1, volume 1, chapter 1, pages 3-85 Elsevier.
  2. Bergman, Lars, 2005. "CGE Modeling of Environmental Policy and Resource Management," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 3, chapter 24, pages 1273-1306 Elsevier.
  3. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production II: Tax Rules," American Economic Review, American Economic Association, vol. 61(3), pages 261-78, June.
  4. Östblom, Göran, 1999. "An Environmental Medium Term Economic Model - EMEC," Working Paper 69, National Institute of Economic Research.
  5. Lawrence H. Goulder, 1998. "Environmental Policy Making in a Second-Best Setting," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 279-328, November.
  6. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
  7. Hans Kremers & Peter Nijkamp & Piet Rietveld, 2000. "A Meta-Analysis of Price Elasticities of Transport Demand in a General Equilibrium Framework," Tinbergen Institute Discussion Papers 00-060/3, Tinbergen Institute.
  8. Hans M. Amman & David A. Kendrick, . "Computational Economics," Online economics textbooks, SUNY-Oswego, Department of Economics, number comp1, Spring.
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Cited by:
  1. Bohlin, Lars, 2010. "SAINT – a Standardized CGE-model for Analysis of Indirect Taxation," Working Papers 2010:6, Örebro University, School of Business.

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