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Avoiding Adverse Employment Effects from Energy Taxation: What does it cost?

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    Abstract

    Welfare analysis of energy taxes typically shows that systems with uniform rates perform better than differentiated systems. However, most western countries include some exemptions for their energy-intensive export industry, and hence, avoid this potential welfare gain. Böhringer and Rutherford (1997) find that compared to a differentiated system, uniform taxation in combination with a wage subsidy preserve jobs in these industries at a fraction of the potential welfare gain in the German economy. This result holds in this Norwegian study where a more broad based subsidy scheme, represented by production dependent subsidies, is used to protect jobs in the Norwegian energy-intensive industry. However, the welfare cost per job preserved by this subsidy scheme amounts to about 60 percent of the wage cost per job, suggesting that these jobs are expensive to preserve.

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    Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 432.

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    Date of creation: Sep 2005
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    Handle: RePEc:ssb:dispap:432

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    Keywords: Energy taxes; Political feasibility; Competitiveness; CGE models;

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    1. Carlo Carraro & Gilbert E. Metcalf, 2000. "Behavioral and Distributional Effects of Environmental Policy: Introduction," Discussion Papers Series, Department of Economics, Tufts University, Department of Economics, Tufts University 0011, Department of Economics, Tufts University.
    2. Klette, Tor Jakob, 1999. "Market Power, Scale Economies and Productivity: Estimates from a Panel of Establishment Data," Journal of Industrial Economics, Wiley Blackwell, vol. 47(4), pages 451-76, December.
    3. Felder, Stefan & Schleiniger, Reto, 2002. "Environmental tax reform: efficiency and political feasibility," Ecological Economics, Elsevier, vol. 42(1-2), pages 107-116, August.
    4. Herman Vollebergh & Jan Vries & Paul Koutstaal, 1997. "Hybrid carbon incentive mechanisms and political acceptability," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 9(1), pages 43-63, January.
    5. Goulder, Lawrence & Bovenberg, A. Lans, 2000. "Neutralizing the Adverse Industry Impacts of CO2 Abatement Policies: What Does It Cost?," Discussion Papers, Resources For the Future dp-00-27, Resources For the Future.
    6. Richter, Wolfram F. & Schneider, Kerstin, 2003. "Energy taxation: Reasons for discriminating in favor of the production sector," European Economic Review, Elsevier, vol. 47(3), pages 461-476, June.
    7. Brita Bye & Karine Nyborg, 2003. "Are Differentiated Carbon Taxes Inefficient? A General Equilibrium Analysis," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 0(Number 2), pages 95-112.
    8. Bohringer, Christoph & Rutherford, Thomas F., 1997. "Carbon Taxes with Exemptions in an Open Economy: A General Equilibrium Analysis of the German Tax Initiative," Journal of Environmental Economics and Management, Elsevier, vol. 32(2), pages 189-203, February.
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    Cited by:
    1. Geir H. Bjertnæs & Taran Fæhn & Jørgen Aasness, 2008. "Designing an electricity tax system in presence of international regulations and multiple public goals: An empirical assessment," Discussion Papers, Research Department of Statistics Norway 555, Research Department of Statistics Norway.

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