Green Taxes and Administrative Costs: The Case of Carbon Taxation
AbstractThis paper explores the trade-off between incentive effects and administrative costs associated with the implementation of various environmental tax instruments, with special reference to carbon taxes. In a simple model, we show under what conditions it is optimal to use input rather than emission taxes to internalize environmental externalities. Mixed tax regimes are also studied. If linkage of emissions to inputs is close, if abatement possibilities are costly, and if administrative costs of emission taxes are high, emission taxes should not be introduced. It is shown that these conditions directly apply to current tax policies toward CO2 emissions in several European countries that harness pre-existing energy taxes. First, there is a one-to-one correspondence between carbon content of energy and CO2 emissions. Second, only few possibilities exist to abate CO2 emissions separately. Third, energy excises allow to save on administrative costs. Broadening the carbon tax base by removing certain widely-used exemptions for energy production (and possibly adding emission taxes or abatement subsidies for selected industries) is likely to increase incentives for carbon reduction without significant additional administrative costs.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7298.
Date of creation: Aug 1999
Date of revision:
Publication status: published as Sjak Smulders, Herman R. J. Vollebergh. "Green Taxes and Administrative Costs: The Case of Carbon Taxation," in Carlo Carraro and Gilbert E. Metcalf, editors, "Behavioral and Distributional Effects of Environmental Policy" University of Chicago Press (2001)
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- Sjak Smulders & Herman R. J. Vollebergh, 2001. "Green Taxes and Administrative Costs: The Case of Carbon Taxation," NBER Chapters, in: Behavioral and Distributional Effects of Environmental Policy, pages 91-130 National Bureau of Economic Research, Inc.
- NEP-AGR-1999-08-27 (Agricultural Economics)
- NEP-ALL-1999-08-27 (All new papers)
- NEP-CDM-1999-08-27 (Collective Decision-Making)
- NEP-ENE-1999-09-01 (Energy Economics)
- NEP-ENV-1999-08-27 (Environmental Economics)
- NEP-PBE-1999-08-28 (Public Economics)
- NEP-PUB-1999-08-27 (Public Finance)
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