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Double dividend effectiveness of energy tax policies and the elasticity of substitution: A CGE appraisal

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  • Sancho, Ferran

Abstract

There is a considerable body of literature that has studied whether or not an adequately designed tax swap, whereby an ecotax is levied and some other tax is reduced while keeping government income constant, may achieve a so-called double dividend, that is, an increase in environmental quality and an increase in overall efficiency. Arguments in favor and against are abundant. Our position is that the issue should be empirically studied starting from an actual, non-optimal tax system structure and by way of checking the responsiveness of equilibria to revenue neutral tax regimes under alternate scenarios regarding technological substitution. With the use of a CGE model, we find that the most critical elasticity for achieving a double dividend is the substitution elasticity between labor and capital whereas the elasticity that would generate the highest reduction in carbon dioxide emissions is the substitution elasticity among energy goods.

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  • Sancho, Ferran, 2010. "Double dividend effectiveness of energy tax policies and the elasticity of substitution: A CGE appraisal," Energy Policy, Elsevier, vol. 38(6), pages 2927-2933, June.
  • Handle: RePEc:eee:enepol:v:38:y:2010:i:6:p:2927-2933
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    References listed on IDEAS

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    Cited by:

    1. Yang, Mian & Fan, Ying & Yang, Fuxia & Hu, Hui, 2014. "Regional disparities in carbon dioxide reduction from China's uniform carbon tax: A perspective on interfactor/interfuel substitution," Energy, Elsevier, vol. 74(C), pages 131-139.
    2. Yun Fei Yao & Qiao-Mei Liang & Dong-Wei Yang & Hua Liao & Yi-Ming Wei, 2016. "How China’s current energy pricing mechanisms will impact its marginal carbon abatement costs?," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 21(6), pages 799-821, August.
    3. Geir H. Bjertnæs & Marina Tsygankova & Thomas Martinsen, 2012. "The double dividend in the presence of abatement technologies and local external effects," Discussion Papers 691, Statistics Norway, Research Department.
    4. Alberto Gago & Xavier Labandeira & Xiral López Otero, 2014. "A Panorama on Energy Taxes and Green Tax Reforms," Hacienda Pública Española, IEF, vol. 208(1), pages 145-190, March.
    5. Bjertnæs, Geir H. & Tsygankova, Marina & Martinsen, Thomas, 2013. "Norwegian climate policy reforms in the presence of an international quota market," Energy Economics, Elsevier, vol. 39(C), pages 147-158.
    6. Anton Orlov & Harald Grethe, 2012. "Carbon Taxation in Russia: Relevance of Export Taxes on Energy Resources," EcoMod2012 4117, EcoMod.
    7. Ana-Isabel Guerra & Laura Varela-Candamio & Jesús López-Rodríguez, 2016. "Evaluating Macroeconomic And Distributional Impacts Of Current And Alternative Tax Reforms In Spain: An Applied General Equilibrium Approach," EcoMod2016 9322, EcoMod.
    8. Orlov, Anton & Grethe, Harald, 2012. "Carbon taxation and market structure: A CGE analysis for Russia," Energy Policy, Elsevier, vol. 51(C), pages 696-707.
    9. Orlov, Anton & Grethe, Harald & McDonald, Scott, 2013. "Carbon taxation in Russia: Prospects for a double dividend and improved energy efficiency," Energy Economics, Elsevier, vol. 37(C), pages 128-140.
    10. Oral, Isil & Santos, Indhira & Zhang, Fan, 2012. "Climate change policies and employment in Eastern Europe and Central Asia," Policy Research Working Paper Series 6294, The World Bank.
    11. Webster, Allan & Ayatakshi, Sukanya, 2013. "The effect of fossil energy and other environmental taxes on profit incentives for change in an open economy: Evidence from the UK," Energy Policy, Elsevier, vol. 61(C), pages 1422-1431.

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