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Implications of incorporating domestic margins into analyses of energy taxation and climate change policies

  • Peterson, Everett B.
  • Lee, Huey-Lin

In most applied general equilibrium (AGE) analyses, the domestic transportation, wholesaling, and retailing services that facilitate the flow of goods and services from producers to consumers are not identified by commodity or use. Because the margins on energy commodities can be substantial, ignoring these domestic margins has important consequences when analyzing the impacts of policies designed to limit greenhouse gas emissions. This paper incorporates domestic trade and transport margins into the GTAP-E model, which has previously been used to analyze climate change policies. Models that do not explicitly incorporate domestic margins over-estimate the reduction in CO2 emissions from a given carbon tax or under-estimate the level of a carbon tax needed to achieve a specific abatement target when domestic margins are fixed or when the carbon tax is treated as a consumption tax with variable domestic margins. However, this result can be reversed when the carbon tax is treated as an output tax with variable domestic margins.

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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 26 (2009)
Issue (Month): 2 (March)
Pages: 370-378

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Handle: RePEc:eee:ecmode:v:26:y:2009:i:2:p:370-378
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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  1. Nijkamp, Peter & Wang, Shunli & Kremers, Hans, 2005. "Modeling the impacts of international climate change policies in a CGE context: The use of the GTAP-E model," Economic Modelling, Elsevier, vol. 22(6), pages 955-974, December.
  2. Burniaux, Jean-Marc & Truong Truong, 2002. "GTAP-E: An Energy-Environmental Version of the GTAP Model," GTAP Technical Papers 923, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  3. Bohringer, Christoph & Loschel, Andreas, 2006. "Computable general equilibrium models for sustainability impact assessment: Status quo and prospects," Ecological Economics, Elsevier, vol. 60(1), pages 49-64, November.
  4. Dagoumas, A.S. & Papagiannis, G.K. & Dokopoulos, P.S., 2006. "An economic assessment of the Kyoto Protocol application," Energy Policy, Elsevier, vol. 34(1), pages 26-39, January.
  5. Peterson, Everett, 2006. "GTAP-M: A GTAP Model and Data Base that Incorporates Domestic Margins," GTAP Technical Papers 2200, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
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