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Environmental Tax Reform and Government Expenditure

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  • Shane Bonetti
  • Felix FitzRoy

Abstract

In a simple model of production with an imported polluting resource and involuntary unemployment we consider the effects of energy taxes, holding the real wage constant, under differing levels of government expenditure and externalities. Simulations reveal conflict between the goals of net welfare, employment and profitability over much of the relevant parameter range, thus extending the usual discussion of multiple dividends. However, potential net welfare and employment gains are substantial for plausible parameters. The optimal energy tax declines as government expenditure rises and is less than the Pigovian tax for plausible externalities. Copyright Kluwer Academic Publishers 1999

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  • Shane Bonetti & Felix FitzRoy, 1999. "Environmental Tax Reform and Government Expenditure," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 13(3), pages 289-308, April.
    • Handle: RePEc:kap:enreec:v:13:y:1999:i:3:p:289-308
    DOI: 10.1023/A:1008298827112
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    References listed on IDEAS

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    1. de Bovenberg, A Lans & Mooij, Ruud A, 1994. "Environmental Levies and Distortionary Taxation," American Economic Review, American Economic Association, vol. 84(4), pages 1085-1089, September.
    2. Ian W.H. Parry, 2002. "Pollution Taxes and Revenue Reycling," Chapters, in: Lawrence H. Goulder (ed.), Environmental Policy Making in Economies with Prior Tax Distortions, chapter 15, pages 235-248, Edward Elgar Publishing.
    3. Lans Bovenberg & Frederick van der Ploeg, 1994. "Consequences of Environmental Tax Reform for Involuntary Unemployment and Welfare," CESifo Working Paper Series 56, CESifo.
    4. Søren Nielsen & Lars Pedersen & Peter Sørensen, 1995. "Environmental policy, pollution, unemployment, and endogenous growth," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 2(2), pages 185-205, August.
    5. Peter Hoeller & Jonathan Coppel, 1992. "Energy Taxation and Price Distortions in Fossil Fuel Markets: Some Implications for Climate Change Policy," OECD Economics Department Working Papers 110, OECD Publishing.
    6. Pearce, David W, 1991. "The Role of Carbon Taxes in Adjusting to Global Warming," Economic Journal, Royal Economic Society, vol. 101(407), pages 938-948, July.
    7. Ireland, Peter N., 1994. "Supply-side economics and endogenous growth," Journal of Monetary Economics, Elsevier, vol. 33(3), pages 559-571, June.
    8. Fredriksson, Per G. & Gaston, Noel, 1999. "The "greening" of trade unions and the demand for eco-taxes," European Journal of Political Economy, Elsevier, vol. 15(4), pages 663-686, November.
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    Cited by:

    1. Amitrajeet A. Batabyal & Hamid Beladi, 2008. "A Dynamic Analysis Of Protection And Environmental Policy In A Small Trading Developing Country," World Scientific Book Chapters, in: Dynamic And Stochastic Approaches To The Environment And Economic Development, chapter 11, pages 189-212, World Scientific Publishing Co. Pte. Ltd..
    2. Felix R. FitzRoy & Ian Smith, 2002. "Welfare, Growth and Environment: A Sceptical Review of The Skeptical Environmentalist(Bjørn Lomborg, Cambridge University Press, 2001)," Discussion Paper Series, School of Economics and Finance 200204, School of Economics and Finance, University of St Andrews.
    3. Felix FitzRoy & Ian Smith, 2004. "Welfare, Growth and Environment: A Sceptical Review of the Skeptical Environmentalist by B. Lomborg," Scottish Journal of Political Economy, Scottish Economic Society, vol. 51(5), pages 707-717, November.
    4. Kejia Yan & Rakesh Gupta & Suneel Maheshwari, 2023. "Using Carbon Tax to Reach the U.S.’s 2050 NDCs Goals—A CGE Model of Firms, Government, and Households," JRFM, MDPI, vol. 16(7), pages 1-30, June.
    5. Amitrajeet A. Batabyal & Dug Man Lee, 2008. "Dynamic Environmental Policy In Developing Countries With A Dual Economy," World Scientific Book Chapters, in: Dynamic And Stochastic Approaches To The Environment And Economic Development, chapter 10, pages 165-187, World Scientific Publishing Co. Pte. Ltd..

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