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Modelling the Health Related Benefits of Environmental Policies and Their Feedback Effects: A CGE Analysis for the EU Countries with GEM-E3

  • Inge Mayeres
  • Denise Van Regemorter

A number of recent studies on taxation in the presence of externalities in a second-best framework consider the implications of taking into account the feedback effects of environmental quality. This paper explores by means of GEM-E3, a computable general equilibrium model for the EU countries, the importance of the feedback effects of the health related benefits from an environmental policy. The modelling framework implemented in GEM-E3 allows for three channels through which the feedback can occur: a decrease in medical expenditure, an increase in the consumersÕ available time and an increase of labour productivity in the production sectors. The results show that the explicit modelling of the health related effect of air pollution on consumers and producers allows for a more precise evaluation of the impact of environmental policies on private consumption and employment. Relative to the included benefits the feedback effects are large. However, in terms of global effect, the impacts of the feedback are small, compared to the standard GEM-E3 model where the health related benefits are evaluated ex-post.

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Article provided by International Association for Energy Economics in its journal The Energy Journal.

Volume (Year): Volume 29 (2008)
Issue (Month): Number 1 ()
Pages: 135-150

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Handle: RePEc:aen:journl:2008v29-01-a07
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  1. Jesse Schwartz & Robert Repetto, 2000. "Nonseparable Utility and the Double Dividend Debate: Reconsidering the Tax-Interaction Effect," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 15(2), pages 149-157, February.
  2. Gerking, Shelby & Stanley, Linda R, 1986. "An Economic Analysis of Air Pollution and Health: The Case of St. Louis," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 115-21, February.
  3. Roberton C. Williams, 2000. "Environmental Tax Interactions When Pollution Affects Health or Productivity," NBER Working Papers 8049, National Bureau of Economic Research, Inc.
  4. Mayeres, Inge & Proost, Stef, 1997. " Optimal Tax and Public Investment Rules for Congestion Type of Externalities," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(2), pages 261-79, June.
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