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Environmental Tax Reform

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Author Info

  • Ian W.H. Parry
  • John Norregaard
  • Dirk Heine

Abstract

This paper recommends a system of upstream taxes on fossil fuels, combined with refunds for downstream emissions capture, to reduce carbon and local pollution emissions. Motor fuel taxes should also account for congestion and other externalities associated with vehicle use, at least until mileage-based taxes are widely introduced. An examination of existing energy/environmental tax systems in Germany, Sweden, Turkey, and Vietnam suggests that there is substantial scope for policy reform. This includes harmonizing taxes for pollution content across different fuels and end-users, better aligning tax rates with values for externalities, and scaling back taxes on vehicle ownership and electricity use that are redundant (on environmental grounds) in the presence of more targeted taxes.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/180.

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Length: 39
Date of creation: 01 Jul 2012
Date of revision:
Handle: RePEc:imf:imfwpa:12/180

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Related research

Keywords: Energy taxes; Environmental protection; Tax reforms; environmental taxes; environmental tax; tax systems; tax reform; tax system; tax revenues; tax design; excise taxes; tax distortions; emissions taxes; direct tax; payroll taxes; labor taxes; tax expenditures; border tax; excise tax; personal income tax; carbon taxes; tax instruments; optimal tax; environmental taxation; income groups; efficient taxes; tax change; income taxes; pollution taxes; energy tax; capital accumulation; tax changes; tax journal; deficit reduction; tax estimate; distortionary taxation; back taxes; zero taxes; national tax association; domestic tax; national tax journal; optimal taxation; raising tax rates; proportional tax; indirect taxes; income tax system; tax assessment; vat exempt; consumption tax; personal income tax system;

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References

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  1. Lawrence H. Goulder & Ian W. H. Parry & Roberton C. Williams III & Dallas Burtraw, 1998. "The Cost-Effectiveness of Alternative Instruments for Environmental Protection in a Second-Best Setting," NBER Working Papers 6464, National Bureau of Economic Research, Inc.
  2. Brett, Craig & Keen, Michael, 2000. "Political uncertainty and the earmarking of environmental taxes," Journal of Public Economics, Elsevier, Elsevier, vol. 75(3), pages 315-340, March.
  3. Molly Macauley & Roger Sedjo, 2011. "Forests in climate policy: technical, institutional and economic issues in measurement and monitoring," Mitigation and Adaptation Strategies for Global Change, Springer, Springer, vol. 16(5), pages 499-513, June.
  4. Nicholas Z. Muller & Robert Mendelsohn, 2012. "Efficient Pollution Regulation: Getting the Prices Right: Reply," American Economic Review, American Economic Association, American Economic Association, vol. 102(1), pages 608-12, February.
  5. James M. Sallee & Joel Slemrod, 2010. "Car Notches: Strategic Automaker Responses to Fuel Economy Policy," NBER Working Papers 16604, National Bureau of Economic Research, Inc.
  6. Parry, Ian W.H. & Evans, David A. & Oates, Wallace E., 2010. "Are Energy Efficiency Standards Justified?," Discussion Papers, Resources For the Future dp-10-59, Resources For the Future.
  7. Bosquet, Benoit, 2000. "Environmental tax reform: does it work? A survey of the empirical evidence," Ecological Economics, Elsevier, Elsevier, vol. 34(1), pages 19-32, July.
  8. Goulder, Lawrence H. & Schneider, Stephen H., 1999. "Induced technological change and the attractiveness of CO2 abatement policies," Resource and Energy Economics, Elsevier, Elsevier, vol. 21(3-4), pages 211-253, August.
  9. Don Fullerton & Andrew Leicester & Stephen Smith, 2008. "Environmental Taxes," NBER Working Papers 14197, National Bureau of Economic Research, Inc.
  10. Gilbert E. Metcalf, 2008. "Designing A Carbon Tax to Reduce U.S. Greenhouse Gas Emissions," NBER Working Papers 14375, National Bureau of Economic Research, Inc.
  11. Jaffe, Adam B. & Newell, Richard G. & Stavins, Robert N., 2003. "Chapter 11 Technological change and the environment," Handbook of Environmental Economics, Elsevier, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 1, chapter 11, pages 461-516 Elsevier.
  12. Inge Mayeres & Stef Proost, 1998. "Marginal Tax Reform, Externalities and Income Distribution," Center for Economic Studies - Discussion papers, Katholieke Universiteit Leuven, Centrum voor Economische Studiën ces9832, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  13. Fischer, Carolyn & Newell, Richard, 2004. "Environmental and Technology Policies for Climate Mitigation," Discussion Papers, Resources For the Future dp-04-05, Resources For the Future.
  14. Cremer, Helmuth & Gahvari, Firouz & Ladoux, Norbert, 1998. "Externalities and optimal taxation," Journal of Public Economics, Elsevier, Elsevier, vol. 70(3), pages 343-364, December.
  15. Popp, David, 2004. "ENTICE: endogenous technological change in the DICE model of global warming," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 742-768, July.
  16. Bernard, Alain L. & Fischer, Carolyn & Fox, Alan K., 2007. "Is there a rationale for output-based rebating of environmental levies?," Resource and Energy Economics, Elsevier, Elsevier, vol. 29(2), pages 83-101, May.
  17. Hilary Sigman, 2003. "Taxing Hazardous Waste: The U.S. Experience," Departmental Working Papers, Rutgers University, Department of Economics 200306, Rutgers University, Department of Economics.
  18. Goulder, Lawrence H. & Mathai, Koshy, 2000. "Optimal CO2 Abatement in the Presence of Induced Technological Change," Journal of Environmental Economics and Management, Elsevier, vol. 39(1), pages 1-38, January.
  19. Sterner, Thomas & Hoglund Isaksson, Lena, 2006. "Refunded emission payments theory, distribution of costs, and Swedish experience of NOx abatement," Ecological Economics, Elsevier, Elsevier, vol. 57(1), pages 93-106, April.
  20. Bas Jacobs & Ruud A. de Mooij, 2011. "Pigou Meets Mirrlees: On the Irrelevance of Tax Distortions for the Second-Best Pigouvian Tax," CESifo Working Paper Series 3342, CESifo Group Munich.
  21. Lawrence H. Goulder & Ian W. H. Parry, 2008. "Instrument Choice in Environmental Policy," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 2(2), pages 152-174, Summer.
  22. Oates, Wallace E & Portney, Paul R & McGartland, Albert M, 1989. "The Net Benefits of Incentive-Based Regulation: A Case Study of Environmental Standard Setting," American Economic Review, American Economic Association, American Economic Association, vol. 79(5), pages 1233-42, December.
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Citations

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Cited by:
  1. Oueslati, Walid, 2014. "Environmental tax reform: Short-term versus long-term macroeconomic effects," Journal of Macroeconomics, Elsevier, Elsevier, vol. 40(C), pages 190-201.
  2. Walid Oueslati, 2013. "Short and Long-term Effects of Environmental Tax Reform," Working Papers, Fondazione Eni Enrico Mattei 2013.09, Fondazione Eni Enrico Mattei.
  3. Rabia Manzoor & Ghulam Samad, 2013. "The Sustainable Green Growth Perspective of Pakistan: In the Context of Environment Friendly Technologies," CEECC Working Paper, Pakistan Institute of Development Economics 2013:04, Pakistan Institute of Development Economics.

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