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Green taxes: Refunding rules and lobbying

  • Aidt, Toke S.

Green taxes can internalize environmental externalities and raise revenues. We develop a positive theory that treats both of these aspects as endogenous outcomes of special-interest and electoral politics. We consider the choice among three (endogenous) refunding rules: income tax cuts, extra public spending and tax burden compensation to polluters. We show that a polluter lobby group may lobby for the ecotax revenue to be refunded to voters rather than to its members. The reason is that the "price" that the lobby group must pay for a reduction in the green tax can be reduced by supporting a refunding rule that pleases voters. Our analysis provides insights into recent green tax reforms in Europe.

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Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 60 (2010)
Issue (Month): 1 (July)
Pages: 31-43

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Handle: RePEc:eee:jeeman:v:60:y:2010:i:1:p:31-43
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622870

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  1. Lawrence Goulder, 1995. "Environmental taxation and the double dividend: A reader's guide," International Tax and Public Finance, Springer, vol. 2(2), pages 157-183, August.
  2. Fredriksson, Per G. & Sterner, Thomas, 2004. "The Political Economy of Refunded Emissions Payment Programs," Working Papers in Economics 147, University of Gothenburg, Department of Economics.
  3. Sterner, Thomas & Hoglund Isaksson, Lena, 2006. "Refunded emission payments theory, distribution of costs, and Swedish experience of NOx abatement," Ecological Economics, Elsevier, vol. 57(1), pages 93-106, April.
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  14. Dijkstra, Bouwe R., 1998. "A two-stage rent-seeking contest for instrument choice and revenue division, applied to environmental policy," European Journal of Political Economy, Elsevier, vol. 14(2), pages 281-301, May.
  15. Gersbach, Hans & Requate, Till, 2004. "Emission taxes and optimal refunding schemes," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 713-725, March.
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